THE IMPACT OF PROPERTY TAXATION ON BUSINESS INVESTMENT IN ALBERTA

  • Bev Dahlby University of Calgary
  • Ergete Ferede
  • Mukesh Khanal

Abstract

Alberta municipalities rely heavily on property taxes levied on residential and non-residential sectors to finance local public services. This paper investigates the effects of non-residential property tax rate on business investment using panel data from 17 Alberta cities over the 1998-2017 period. We find that a one mill increase in the non-residential property tax rate is associated with a $49 decrease in commercial and industrial real capita investment. Based on this estimate, we calculate the marginal cost of public funds for the non-residential property tax, which range from 3.12 for Lethbridge to 1.21 for Leduc.  We also find that business taxes that are levied on the rental value of a business property have a negative impact on investment, while higher expenditures on municipal services do not have a significant effect on business investment.

Published
2021-03-16
Section
Research Papers