Toronto Considers Municipal Sales Tax Ahead of Budget Talks

The City of Toronto is revisiting the idea of implementing a municipal sales tax as it prepares for next spring’s budget discussions. Residents who oppose the addition of this tax should voice their concerns now, as the proposal is gaining traction.

Shortly after Olivia Chow was elected mayor in 2023, city staff proposed the idea of a third layer of consumer taxation. A report released that summer explored the potential revenue from such a tax and recommended discussions with the provincial government, which must approve any new tax powers. At that time, the province did not comment on the proposal.

The idea seemed to lose momentum but has resurfaced through a budget consultation questionnaire sent to residents. This survey includes a question asking which areas the Province of Ontario and the federal government should collaborate with the city on, listing “allowing a Municipal Sales Tax for goods and services purchased in Toronto” as an option.

Another question prompts residents to consider what actions they would take to encourage provincial and federal cooperation with the city. Suggested actions include meeting with politicians and engaging in petition campaigns. The survey also offers workshops for those interested in advocating for the tax. Critics argue that the survey is misleading, presenting loaded questions that push for tax support rather than gathering neutral feedback.

Opponents of the municipal sales tax argue it would disproportionately affect low-income residents, as it would apply to everyday expenses. This budget will be Chow’s last before the fall municipal election, raising questions about whether she wants to advocate for a new tax just before seeking re-election.

In recent years, the city has not made significant efforts to manage costs effectively. A hiring freeze on non-essential workers was recently implemented as an emergency measure, which some believe should have been enacted earlier in Chow’s tenure. Additionally, there has been no zero-based budgeting process, which would require justification for each expense annually.

City spending has increased significantly, with the annual operating budget rising from $16 billion to over $18 billion in just two years. Despite this increase, many residents feel they are not receiving better services.

Toronto faces legitimate budget challenges, including a decline in real estate development charges and pressures from rapid population growth in the Greater Toronto Area. While discussions about fiscal responsibility and spending priorities are necessary, critics argue that introducing new taxes should not be the immediate solution to these challenges.