Taxed on the air: Vancouver restaurant dinged by B.C.'s vacancy tax for open space above building

The owner of a long-standing Vancouver restaurant is wondering why he is being told to pay the provincial vacancy tax.

Dan Rodriguez, the owner of Las Margaritas in Kitsilano, says his taxes have gone up by $6,000 this year because he’s been hit with B.C.’s speculation and vacancy tax.

The tax, which ranges from 0.5 to 2 per cent of a property’s assessed value, was implemented by the B.C. NDP in 2018 as a way to turn vacant homes and land into housing.

Rodriguez says the provincial government considers the open air above his restaurant on West 4th Avenue to be vacant space that could be filled with apartments or condo units. He’s now being taxed on the property’s perceived potential.

“I don’t undersand it. The air above us, we’re being taxed on, which makes no sense.”

Rodriguez does not own the land, but he pays taxes and maintenance fees as part of the lease agreement with his landlord. He says the landowners have no plans to redevelop the restaurant into housing, and shouldn’t be forced to cough up more cash because of that.

Kris Sims with the Canadian Taxpayers Federation agrees.

“They are a restaurant. They serve people food in their neighbourhood. They are not an apartment complex, and they should not be taxed based on whether or not they could be an apartment complex," Sims said.

The speculation and vacancy tax took effect several years ago, but the province is just now beginning to charge owners of residential land it considers vacant. The added expense comes in the middle of a global pandemic, where many small businesses are barely surviving.

“Only 35 per cent of B.C. small businesses are making normal sales for this time of year. To add an additional tax that goes above the increasing property taxes small businesses have to pay, it’s definitely quite concerning,” says Annie Dormuth, provincial affairs director with the Canadian Federation of Independent Business.

Paying taxes on what land could become is nothing new in this province. Property taxes are calculated using the highest and best use of a property. For example, a single-storey coffee shop on a lot that could be transformed into a four-storey mixed-use building will end up paying a tax rate based on that potential.

Rodriguez has already seen neighbouring shops shut down during the pandemic. He fears the added expense of the SVT, on top of rising property taxes, will be the final nail in the coffin for even more small businesses in Kitsilano and beyond.

“I hope they get rid of this tax. It doesn’t make any sense. And, I hope the little guys can come back, and are revitalized. Give everybody a break.”

In a statement to CTV News, the Ministry of Finance confirms it’s looking into the specific circumstances around Las Margaritas, to ensure the SVT is operating as intended.

In a perfect world, Dormuth says the SVT would not apply to independent businesses, no matter the property’s potential. She’s calling on the province to scrap the tax altogether.

“Or, at the very least, provide an additional year long exemption from the SVT until businesses can again start operating under pre-pandemic operations.”