By Mark Squibb | Vol 8 No. 4 (March 3, 2020)
A tax break designed to encourage new businesses to call Mount Pearl home has once again caused some controversary in the council chambers.
Start-ups in the craft, technology, and retail sectors can apply for a four-year scaled tax break to a maximum of $5,000 annually.
New businesses receive an 80 percent tax break their first year in business, 60 percent the next year, a 40 per cent break in year three, petering down to a 20 per cent break in year four.
The program was launched last May during the ‘Consider it Done’ business promotion campaign launch, with The Newfoundland Gold Company being the first business to successfully apply for the tax break.
That’s company’s tax break was unanimously approved by council in October, although councillor Lucy Stoyles expressed concerns such a policy is not fair to long established businesses.
She reiterated some of those concerns during the Feb. 4 meeting, when council discussed an application from Compounding Wellness Sterile Lab. That business paid $4,882 in commercial tax in 2019, but will pay only 20 per cent of that amount this year because it has been approved for status under the tax break program. Stoyles inquired if it would be a ‘one-time’ tax break, and if the same business could apply again next year.
Acting director of corporate services Cassie Pittman outlined the program’s phasing in of the tax rate, noting that by the fifth year, the business would be paying the full commercial rate.
Stoyles next asked how much exactly this particular application will cost the City, contending that it would be ‘a lot.’ “That’s a lot of money at the end of five years,” said Stoyles, reckoning the sum at about $20,000.
Pittman said the full amount wouldn’t be that much, and that she would work out the actual sum for her.
The actual value of the tax break comes to about $9,764 over four years.
“The idea is, and the rational was the fact that we did research on the length of time a business, once they (open) in a municipality how long they are projected to stay,” said Pittman. “And so, at the five-year mark, it’s very unlikely that a business, unless they experience exponential growth, will remove themselves from the municipality. It’s an investment upfront in the longevity of the tax. And that’s only on their commercial tax, they still pay their full property tax.”
Stoyles next asked if the business would have to pay any of the tax break back to the City if it relocates.
Pittman answered that it would not.
Councillor Andrew Ledwell reminded his colleagues about how the tax break program originated.
“Council will recall, about a year and a half ago, when we rolled out our ‘Consider it Done’ initiatives,” he said. “A lot of that was around eliminating red tape for businesses, trying to help businesses get started in the community, spur on some economic development, and this particular initiative, the scaled back tax program, along with the façade improvement program, were both initiatives that were very much a part of the ‘Consider it Done’ initiatives… We haven’t had the uptake, perhaps, that we expected, but I do want to remind council that this is something that we all agreed to, that we all expected would create some positive economic activity in the city. We can certainly revisit it at anytime, I suppose, as with any decision that we make, but it is something that we all sat around and thought would be a good idea. And, I guess, for a couple of companies at least, it has had a positive impact. But, I don’t know, perhaps it is worthy of another discussion. I just wanted to remind folks that we did put this forward as an initiative to spur on economic development in our city.”
To that Stoyles replied that she though the initiatives would only be for brand new types of businesses. She acknowledged the application did fit the bill as a new business, but argued such a tax break might provide an unfair advantage over existing businesses that provide the same type of service.
“I’d like to revisit it is all,” said Stoyles. “I will support it tonight, because you need a majority of council to support it. But I’d like to revisit it for sure.”
