Question Period Note: 2021 Payments in lieu of taxes and Business Education Tax rates within the Province of Ontario following provincial legislative amendment

The Province of Ontario has implemented a legislative amendment for 2021 regarding Business Education Tax (BET) rates that creates an inequity in treatment between taxable business properties and payment-in-lieu-of-taxes (PILT) properties.

• The Government of Canada is committed to ensuring that municipalities receive fair payments in lieu of taxes that are equitable in comparison to the payments that would be made if the federal property were taxable
  • Legislative amendments made by the Province of Ontario intend to apply higher tax rates to federal property compared to other property in the province. This differing treatment is not permitted under the Payments in Lieu of Taxes Act
  • Measures have been put in place by Public Services and Procurement Canada to ensure that interim payments are made to municipalities while discussions between the department and province of Ontario officials are underway

The legislative amendment lists specific education tax rates for PILT properties, which are higher when compared to the rates identified for similar taxable business property.

This change in legislation has now created an inequity between taxable business properties and federal properties that is contrary to the purpose of the Payments in Lieu of Taxes Act, which is for the fair and equitable administration of PILT. Prior to the latest amendment, the education tax rates applied to both taxable properties and PILT-eligible federal properties were the same.

This amendment was announced through the 2020 Provincial Budget and there was no consultation with the federal government prior to setting these rates.

The Province of Ontario does not have the constitutional authority to impose any taxation on the Government of Canada with respect to federal real property. The constitutional authority for PILT rests with the Parliament of Canada.

The PILT Program has experienced several past situations where provinces have tried to exclude federal properties from tax rebates or mitigation measures. The Program has always remained consistent and ensured that PILT-eligible federal properties are treated equitably, and in the same manner as similar taxable properties.

Next steps

Follow-up meetings with officials from both Public Services and Procurement Canada and the Province of Ontario to discuss the issue and the way forward have been tentatively arranged for the coming weeks.

Follow-up meetings with the Treasury Board, the Department of Finance and all affected custodian departments and Crown corporations will be ongoing as the situation develops.

A stakeholder communications strategy is being worked on and will be finalized based upon the outcome of these meetings.

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