Taxation systems based on residency for corporations and individuals are tough to apply in a borderless world with multinational platforms that employ relatively few workers.
Canada’s municipalities are at the forefront of delivering a growing array of vital services to citizens, ranging from affordable housing, transit and child care to managing more than a trillion dollars of infrastructure.
These challenges are particularly acute at the local level, where revenue options are largely limited to land-based tools in the form of property taxes and development charges . To add to these challenges, a fundamental reality facing local governments in Canada is that constitutionally, they are “creatures of the province.” Their autonomy in responding to new challenges is limited — any new power, including the ability to introduce new financial tools, requires provincial approval.
The latest federal budget announced a Municipal Infrastructure Top-Up of $2.2 billion, which will double the amount of money municipalities generally receive through the federal gas tax fund. Governments’ responsibilities have dramatically shifted in the 50 years since the last similar review was conducted. For every household tax dollar paid in Ontario, municipalities collect only nine cents, which doesn’t begin to match their ever-increasing list of responsibilities.
Tapping into the increase in digital economic activity could also provide new revenue streams for municipalities. Some options include a tax on Airbnb rentals, as Ottawa and Toronto have introduced, or fees per kilometre travelled for ride-hailing firms such as Lyft or Uber, as in the Brazilian city of Sao Paulo, which expects to raise $15 million a year for infrastructure needs through this levy.
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