WHEREAS the Lieutenant Governor establishes interest rates on taxes in arrears or delinquent by adding three percent to the prime lending rate; AND WHEREAS local governments may be owed outstanding taxes which cause a hardship to operate within a budget: THEREFORE BE IT RESOLVED that UBCM urge the Lieutenant Governor to increase the interest rate on arrears and delinquent taxes to an interest rate comparable to consumer debt.
Ministry of Community, Sport Cultural Development The interest rates on arrears and delinquent property taxes are established under Section 113 of the Taxation Rural Area Act. The rates are also applicable to Sections 412 and 417 of the Local Government Act and Section 245, 246 and 254 of the Community Charter to preserve a provincial wide standard on interest rates on unpaid taxes. Currently, these rates are calculated by adding three percent to the prime lending rate as of the 15th of the month preceding the effective date of the principal banker to the Province. The complaint that the prescribed property tax interest rate lags behind current bank lending rates is valid only in the relatively rare periods of steeply rising general interest rates. Any disincentive to pay property taxes in this situation is small, and is offset by the contrary situation where market interest rates fall sharply causing an incentive to pay. It is unlikely that a small increase in the interest rate charged on overdue rural property tax accounts would result in a significant increase in payment compliance. The objective of the Province in the application of interest to real property tax accounts receivable is to set a rate that will encourage payment without being usurious. Municipalities already are required to levy an immediate 10 penalty when taxes are not paid by the due date creating a significant incentive to pay taxes on time. In addition, municipalities only have to carry the taxes for three years until the property must be taken to tax sale to recover the outstanding taxes making collection relatively risk free. Due to these factors, the Ministry is satisfied with the current arrangement for setting the interest rate on unpaid property taxes at this time.