Toronto hoping for provincial nod on power to tax hotels, Airbnb

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Toronto may finally find out if it will be able to lodge a hotel and short-term accommodation tax, though the hotel industry is hoping the provincial government will shoot it down. 

The city's politicians have waited months.

City council voted 37-5 in favour of the proposed tax at a meeting in mid-December, and Mayor John Tory sent a formal request to the province shortly after.

But since then, there's been silence, prompting Tory to ask for the required legislation change in a letter to Finance Minister Charles Sousa ahead of this spring's provincial budget.

"I'm just speaking up for the people that I serve," Tory recently told reporters about his requests, which also included funding for major infrastructure projects in the city.

Premier Kathleen Wynne, meanwhile, said work has been going on behind the scenes, and hinted a response is coming in "the near future."

Terry Mundell, President and CEO of the Greater Toronto Hotel Association says if approved, the tax would hurt both his industry and those travelling in this province.

"This has all the opportunity in the world to be a tax on the family vacation," he told CBC Toronto, adding that more than a third of visitors to the city come from elsewhere in Ontario.

"The premier has been talking about pocketbook issues," he said. "This is a pocketbook issue."

Mundell also warned that if the province grants Toronto the power to tax hotels — the city is proposing a four per cent tax on hotels and a 10 per cent tax on short-term rentals like Airbnb — other municipalities may ask for the same.

If Toronto were, however, to be the only place to tax hotels, Mundell said, more hotel developers may set up in the 905, where cheaper fees have led to thousands more rooms being added in recent years.

"We need to be careful that we're not taxing a sector of the economy right out of business," he said, noting that would also affect local restaurants, attractions and other industries that cater to tourists.

Mundell isn't, however, against taxing short-term accommodations like Airbnb. He said he considers that "tax fairness" because most of those units only pay residential tax, as opposed to the more expensive commercial taxes.

Airbnb has previously indicated that it's open to working with the city on potential rule changes.

More pressure, perhaps, after blocking road tolls

The fresh call to approve the hotel tax also comes as the city is holding a series of public consultations to figure out how to deal with the fallout of services like Airbnb.

Some groups say the short-term rental service takes would-be rental properties off the market at a time when the vacancy rate for condo apartments sits at just one per cent.

Wynne, meanwhile, is likely facing some pressure to side with the city after denying Toronto the right to put road tolls on the Gardiner Expressway and Don Valley Parkway.

The premier didn't offer a timeline for when a potential tax could be approved, but said she's aware it's a priority for the mayor.

"I know he'd like to have this very soon."

City documents show staff would have to develop the guidelines for the tax throughout the summer, but it could be in place and generating money by the end of this year.