Report puts congestion tax, alcohol tax on Toronto council’s radar

A report from KPMG looks at everything from a parking levy to a tax on alcoholic beverages.

Thestar.com
June 21, 2016
By Betsy Powell

A new report commissioned by the city evaluates a dozen taxes and tolls Toronto could implement to help pay for its long list of approved, but not funded, capital projects.

The 185-page report by KPMG is included on the agenda of next week’s executive committee meeting.

In May 2013, the previous council, presented with potential new taxes to fund transit expansion, voted them all down.

This time around, city manager Peter Wallace is urging council to embrace new revenue tools, which could include a city tax on alcohol, road tolls, a municipal sales tax, a parking tax, or giving Toronto a share of income tax.

The report revisits revenue options studied in 2007, as well as other taxes currently not permitted under the City of Toronto Act.

“The study and this report are . . . important groundwork for the Long-Term Financial Direction, and will be used for reference during the upcoming report in the fall of 2016,” the city’s summary says.

Earlier this month, council directed Wallace and city staff to report in the fall on a strategy that “would optimize existing and potential new revenues.”

Congestion tax ($220 million)

A “cordon” fee applied to vehicles entering or exiting a predetermined area during a certain time period has the potential to generate substantial revenue. The report defines Toronto’s downtown cordon zone as Bathurst St. to the west, the CP Rail corridor near Dupont St. to the north, Bayview Ave./Don River to the east, and Lake Ontario to the south. Cordons, or congestion zones, are increasingly common worldwide and, despite initial “mixed consensus,” have generally received positive public support after implementation.

Alcohol tax ($21 million to $151 million)

An alcoholic beverage tax has the potential to raise “meaningful amounts of revenue” and is common in municipalities across the United States. A key disadvantage is that it’s a tax on retail sales, which could be “subject to more consumer avoidance.” It’s also more visible to the end consumer and more likely to be borne by Toronto residents than out-of-town visitors.

Parking tax ($171 million to $535 million)

A parking sales tax or levy could have a positive impact on the city’s ability to generate sustainable revenue. Studies show general support from the public if parking tax revenue is earmarked for transit and transportation improvements. Additionally, this type of revenue is likely to shift consumer behaviour toward alternate forms of transportation and reduce road congestion.

Amusement tax ($4 million to $35 million)

An entertainment and amusement tax affects discretionary, recreational spending, so arguably is preferable to revenue options that affect other goods and services about which consumers have less choice. Regina, Saskatoon and Winnipeg have municipal frameworks for collecting such taxes that Toronto could potentially adopt. A downside is that the revenue potential is relatively low compared with other options.

Vehicle registration tax ($18 million to $94 million)

A motor vehicle registration tax is a common revenue stream in big cities and a “practical and sustainable” method to increase annual revenue. Implementation, administration and enforcement costs are relatively low compared with other options. On the downside, council, under then mayor Rob Ford, repealed the $60 Personal Vehicle Tax in 2011, so policy-makers will “need to overcome unpopularity associated specifically with the vehicle registration tax to ensure the revenue option’s longevity.”