IPTI | Newsletter: July 2025

I would like to start this newsletter with a timely article on the need for change in relation to taxation. The article is titled “The big tax reckoning is coming for Canada” and, although it is focused on Canada, the same issues prevail in many jurisdictions around the world.

The author (Kirk LaPointe) states: “As costs soar and demographics shift, governments can no longer dodge the truth: we either raise more revenue or cut deep. We live in a country with Scandinavian tastes and a North American tax code.

And in case you haven’t noticed, the cost of everything is rising, our social program obligations are growing, the population is aging, our infrastructure is crumbling, and public finances are wheezing.

We feel taxed out, but what we pay now will not pay for all of this if we continue to demand all of this. We would need – yes, we would – new taxes at all levels of government. We won’t like it or easily concede it – I definitely don’t and won’t. But we show no signs that our appetite to borrow from tomorrow to finance today will be ending today, tomorrow or any time soon.

Federally, the realities of demographic, economic and policy forces point to a widening gap between revenue and expenditure. Provincially, health care and education demands are ballooning. Municipally, the least empowered element in the fiscal federation is carrying out responsibilities vastly disproportionate to its revenue tools.

The post-pandemic era is marked by record deficits, aging populations, climate adaptation needs, and the end of near-free borrowing costs. We are on a buy-now, pay-later program of public finances for most anything new. The question seems no longer whether taxes will rise, but how, when and for whom?

The gap between public expectations of services and the political reluctance to inconvenience us with a discussion on how to pay for them is bringing us toward a big, hard wall.

Sure, we can blurt the necessity to “axe the tax,” but the more plausible path is the need to either “grow the dough” or we will need to “know the blow.” If we cannot carve a path of prosperity, what might we anticipate?

Nowhere is the mismatch between revenue and responsibility more acute than at the municipal level. Cities are increasingly tasked with managing housing, homelessness, public safety, policing and potholes, transit and wastewater infrastructure, and climate resilience – all without access to income or sales tax revenue.

Property tax, the primary revenue tool, is ill-suited to finance dynamic social services. Major cities like Vancouver and Toronto, even with empty homes taxes and development cost charges, find the funds insufficient to meet structural needs.

More municipalities are now contemplating or requesting new revenue powers. A municipal share of provincial sales taxes, a dedicated city-imposed one, vehicle levies, and even direct user charges for transit and road usage are on the table. Some cities have proposed land value taxes or progressive property surtaxes on luxury real estate.

Until provinces grant broader taxing authority, municipalities will remain dependent on grants and one-time transfers – a model ill-equipped to meet long-term demands.

Provinces are constitutionally responsible for the services that consume the largest share of public spending: health care, education and infrastructure. Most are struggling to maintain balanced budgets without increasing their reliance on federal transfers, which are themselves under strain.

Within a decade, one in four Canadians will be over the age of 65. Health care spending per capita on seniors is several times higher than for younger Canadians. At the same time, provinces are trying to fund new housing, mental health services and long-term care expansion – areas long ignored that appear no longer optional.

Some provinces, like British Columbia, have introduced targeted taxes, like the speculation and vacancy tax, as a symbolic and surface-level response to public frustration over housing affordability. Others have hinted at returning to broader base of sales taxes or implementing new user fees for transportation and congestion.

In time, without real change in our attitudes and practices, provinces may have to revisit the possibility of harmonized sales taxes or even explore new provincial-level surcharges on capital income. Vehicle levies, congestion pricing and wealth taxes would be despised, but the damaging alternatives are further borrowing or cuts to already-stressed services.

The federal government significantly expanded its fiscal footprint in recent years through pandemic support programs, national dental care, pharmacare commitments and climate transition funding to add billions in ongoing liabilities. At the same time, long-term revenue growth is flattening.

The proposed increase to the capital gains inclusion rate – a restored level, actually – broke from previous federal reluctance to raise taxes. It also highlighted a new dynamic: the political calculus had shifted just enough to allow targeted tax increases under the umbrella of equity. But an election loomed, so the idea was rescinded. The new Mark Carney government is indeed cutting more taxes to deal with unaffordability.

Still, can anyone not believe that more measures are likely to follow? Wealth. Consumption. Corporate profit. Inheritance. Every traditional no-go zone is now at least part of the conversation.

The federal debt servicing burden is projected to reach more than $60 billion by 2027. Without new revenue streams, maintaining current commitments – let alone expanding them – will be increasingly untenable.

Eventually, governments will be forced to reconcile rhetoric with reality. Maybe the taxes will be framed with the help of focus groups as “targeted,” “modest” or “time-limited,” presented as fights against “speculators” or the “ultra-wealthy” or “people not paying their fair share,” in order for us to forget that the people getting taxed might actually include them.

Whether through gradual tax reforms – rebalancing income and consumption taxes, incentivizing behaviour shifts, closing loopholes – or more visible measures, new revenue will need to be raised.

Or, then again, if we’re not prepared to pay more, we’ll have to start expecting less.”

IPTI comment: Whilst the foregoing article goes beyond property tax considerations, it is helpful to see the bigger picture within which property tax forms an important component.

Time now to move on to IPTI matters. We have just concluded one of our most popular events of the year – our annual Mass Appraisal Valuation Symposium (MAVS 2025). With a theme of “Future Opportunities for Mass Appraisal”, this was a 2-day virtual event held on 25 and 26 June and was delivered in partnership with the International Association of Assessing Officers (IAAO). MAVS 2025 was a great event with some 275 participants from 15 countries around the world. Our very knowledgeable speakers (35 in total), also from a large number of international jurisdictions, guided by our 8 experienced moderators, provided a total of 23 very informative presentations over the two days.

They covered a wide range of topics including the latest use of technology, particular valuation challenges, experiences from many different parts of the globe and so much more. For those who were unable to join us for MAVS 2025, a recording of the event is available for purchase; please visit our website for more information.

We also recently delivered another in our series of webinars that we present in partnership with the Institute for Municipal Assessors (IMA) titled “Application of the Discounted Cash Flow Method in Assessment Valuations”. Our two very experienced presenters provided a working overview of the discounted cash flow (DCF) technique in property assessment valuations. They also (a) provided an understanding of the differences between direct capitalization and the DCF methods; (b) explored applications of DCF in a mass appraisal setting and (c) provided attendees with a better understanding of the required inputs for a DCF calculation such as understanding appropriate income patterns, selection of yield rate and inclusion of reversionary value.

As usual, we have a great line-up of other forthcoming events including conferences, symposiums, webinars, etc., details of which are available on our website: www.ipti.org.

Now it’s time for a quick look at what is making headlines concerning property taxes in selected jurisdictions and countries around the world. For more information, and links to the original news articles, please refer to IPTI Xtracts which can be found on our website: https://www.ipti.org/ipti-xtracts

Starting in the USA, an unusual development in South Carolina where a group has developed a plan for a new town with no property tax! Its goal is to take control of land planning and use that to generate a budget with a $1.2 million surplus without a property tax. It is reported that state law prohibits new municipalities from imposing a property tax. The largest share of revenue for the proposed town, $1.3 million, will come from a state tax on insurance premiums that is returned to cities and towns by the S.C. Municipal Association. The proposed town, which would have a population of 16,400, will cover the area from Brookgreen Gardens south to DeBordieu. Along with a petition from electors, the group will have to provide the Secretary of State’s Office with documentation on how it will provide “the minimum service standard” in 10 areas including law enforcement. “Philosophically, what we are looking to do is to partner with the county. The model is the town of Pawleys Island,” a spokesperson said. The island, with a year-round population of fewer than 150 people and a peak summer population of about 5,000, has no municipal property tax. Its budget is $2.58 million, which includes grants and $395,000 from the insurance tax. “Our plan proposes tax-supported service currently provided by the county will continue,” he said. “We’re paying for these services already. Why would you pay for them twice? It makes no sense.” The proposed town expects to receive $444,000 in state aid and $334,000 in other fees, for total revenue of $2.08 million.

Moving on to Lithuania, the Parliament recently backed proposed changes to the country’s property tax law, approving in a second reading new thresholds that would see primary residences taxed only if valued above €450,000, and additional properties taxed from

€50,000. The Finance Minister told the parliamentary Budget and Finance Committee that this version of the primary residence tax would generate an estimated €700,000 to €1 million annually, with properties of such value largely concentrated in the capital Vilnius and the resort town of Neringa. Under the current proposal, while a primary residence would be taxed only if its value exceeds €450,000, subsequent properties would face a progressive tax starting from €50,000, with rates ranging from 0.1% to 1%, depending on the property’s value. The new legislation would also recognise non-residential premises as primary homes in resort towns if declared as such. Property values for tax purposes would be reassessed at least once every three years. Initially, the government had proposed that municipalities set their own minimum non-taxable threshold for primary homes, no lower than €10,000, with rates between 0.1% and 1% applied above that. However, the ruling coalition later agreed that an individual’s sole, inhabited residence should be entirely exempt. This property tax initiative is related to recent comments from the International Monetary Fund which said Lithuania currently collects relatively little from real estate taxes and should consider broadening the tax base. Currently, real estate in Lithuania is taxed progressively at rates of 0.5% to 2%, but only for properties valued above €150,000.

Moving on to New Zealand, Auckland Council’s website reportedly experienced three times its usual volume of traffic as ratepayers reacted to new property tax valuations. Interestingly, while it is reported that the region’s households on average lost 9% of their value, rates payable are said to inevitably continue to climb. The latest blow was particularly felt in the central suburbs where some homes lost hundreds of thousands of dollars on their capital values (CVs). Some first-home buyers who bought at the peak now find themselves with CVs lower than their mortgage balances. A petition has been launched by the Auckland Ratepayers’ Alliance asking the Local Government Minister to cap rates increases at no more than inflation. It received 10,000 signatures on the first day. The average Auckland household, now determined to be worth $1.29m – down from $1.44m – will pay an extra $223 during the 2025/26 rating year. It’s reportedly going to get worse. That dollar figure represents a 5.8% increase that elected councillors voted for in the Auckland Long Term Plan, and homeowners will be hit with another 7.9% later next year. It’s hoped that increases will then be restricted to 3.5% per year. The news report stated that there will be years of legal challenges. At the last revaluation in 2021, more than 9,000 objections were reported to have been made to the council. That was up on previous years – with 2014’s rates increases seeing about 7000 challenges to valuations. Objections to 2021’s valuations were still being heard by the Land Valuation Tribunal as recently as November last year.

In the UK, our old friend – the so-called snail farm – is back in town. In the latest case, involving a £32 million office block on Old Marylebone Road in London, a short walk from Hyde Park, it was found there were more than a dozen sealed boxes marked “L’Escargotiere”. The unusual discovery in the heart of London is what the local authority claims is a “ludicrous” tax avoidance scheme it has spent the past three years trying to tackle, losing more than £280,000 of revenue in the process. Each box is said to contain snails that have turned two empty offices, which would be liable for business rates, into “agricultural facilities” exempt from the tax. It is reported that the first snail farm moved into the empty office on Old Marylebone Road in 2022. The company behind it was wound up by the Insolvency Service in 2024 after a petition by the council over its unpaid business rates (the annual property tax in the UK), a process that can take months. However, another company with a similar name quickly appeared in its place. In total, four companies claiming to run snail farms in the two buildings have been wound up, most recently in March, and two more companies are in the process of being shuttered. Snail farms have popped up in empty office blocks across the country, causing a headache for local authorities who say they are being deprived of thousands of pounds of revenue. The companies behind the city centre snail farms argue they are legitimate enterprises entitled to the agricultural exemption. We will monitor the position with interest.

And finally, in the USA trouble may be brewing in Rhode Island where the so-called “Taylor Swift Tax” could hit her and wealthy neighbours with a six-figure tax bill for leaving their coastal mansions mostly unoccupied. The tax is a proposed surcharge on luxury properties not used as a primary residence and would levy significant annual fees on second homes valued over $1 million. It is reported that Swift’s sprawling estate in Watch Hill, assessed at roughly $17 million, could be subject to an additional $136,000 in taxes each year if the measure is approved. While the legislation does not single out Swift by name, her high-profile ownership has thrust her into the spotlight of a broader debate playing out across New England’s elite seaside enclaves. The initiative, formally referred to in budget documents as a “non-owner-occupied property tax,” is part of a growing effort by lawmakers to address housing affordability in the Ocean State by tapping into the wealth of seasonal residents. At the heart of the proposal is a straightforward formula: properties valued at more than $1 million that are not used as a primary residence would face a surcharge of $2.50 per $500 of assessed value beyond the first million. If passed, the law would not take effect immediately. Homeowners would have until July 2026 to adjust – either by proving they spend at least 183 days a year at the property (the standard for primary residence status) or by listing their homes as rentals. Using the titles of a couple of Taylor Swift songs, she may well assume that these are simply “Champagne Problems” which is something she knows “All Too Well”!

Compliments of the International Property Tax Institute – a member of the EACCNY