Nestled in between Toronto’s famous Eaton Centre, office towers and hotels in the heart of the city’s financial and commercial district, Holy Trinity Church has remained a city landmark even as modern structures have sprouted around it.

The Anglican church, founded in 1847, continues to minister to the poor, new Canadians and other “justice seekers,” says Sara Boyles, the church’s minister. Like many other small, older churches in Canada’s largest city, Holy Trinity does not have a rich congregation.

Churches like Holy Trinity are exempt from paying property taxes on its facilities—one of the ways the church is able to remain financially viable. Since Canada’s Confederation, churches, synagogues and other places of worship have been exempted from paying the tax because they are deemed to provide a “general public benefit” to their communities along side other exempt properties such as hospitals and schools.

Matter of survival
If older, inner city churches like Holy Trinity were required to pay property taxes, most would not be able to survive, says Boyles. While politicians have been reluctant to address whether exempting places of worship makes sense in the context of Canada’s increasingly secular society or even whether it’s fair to other taxpayers to exempt religious properties, it is an issue that is often asked by economists and public policy planners.

“Economists see this [exemption] as a subsidy at the expense of all other property owners,” says David Perry, senior research associate at the Canadian Tax Foundation, a non-partisan think-tank on tax issues. “Is that fair and efficient?”

Perry believes the problem with tax exemptions in general is that municipal tax assessors often do a cursory assessment of a place of worship and, as a result, a property’s value is often not accurate. In the case of Holy Trinity, very little time is spent in the assessment of the church but months are spent on the Eaton Centre, he says.

Perry suggests a better way to deal with church properties would be to tax them like all other properties and have government provide places of worship with a grant. This would increase public knowledge of the social good provided by places of worship and allow for public debate on what kinds of public policy tools should be used to support churches and other benevolent organizations.

Inequitable measure
Over the years, various commissions have been struck by governments to look at different tax systems across Canada, almost always with a goal of making taxation “fair” for the different tax payers—residential, commercial and industrial. Few have dared to suggest that the exemption for churches be abolished. The only major study to make such a suggestion was the 1968 Royal Commission on Taxation.

Subsequent reports, while not addressing church exemptions directly, consistently touched on the perceived “inequities” of tax exemptions. The most clear of these was Ontario’s Property Tax Working Group in 1992. The report argued that, “an exemption from a tax is equivalent to a grant to the exempted taxpayer with one important difference: tax exemptions are generally not accounted for in the budgetary process of local governments and are therefore delivered invisibly.”

It also argued that, “inequities result from the fact that exemptions are often tied to the institution that owns the property rather than the use to which the property is put.” This statement was interpreted at the time as a criticism of churches that were perceived to benefit only their immediate congregation rather than the broader community.

Wrong perception
That’s a perception that is simply wrong, argues John Pellowe, chief executive officer of the Canadian Council of Christian Charities. Pellowe says studies of charitable giving and volunteerism consistently show that churches and church-goers have a real, tangible impact on their immediate communities and beyond.

For example, a 2000 study by the Canadian Centre for Philanthropy on the role of religion on giving and volunteering confirmed that, “Canadians who attend religious services regularly tend to donate and volunteer at higher rates than other Canadians.” The study found that while 72 per cent of non-church-goers made charitable donations in 2000, 90 per cent of regular church attendees made donations. In addition, regular churchgoers were over-represented among top donors and contributed a greater percentage of all donations than they would statistically be expected to.

Similarly, 41 per cent of all churchgoers volunteered their time in charitable causes compared to just 23 per cent of those Canadians who never attend a religious service.

The correlation seems to be that places of worship provide both the means and the drive for people to do or support good works.

“Having dealt with church properties across Canada, the policy of exempting religious properties from municipal taxation does indeed benefit the public good, measured in tangible and intangible returns to the immediate community and society at large,” says David Ball, assistant superintendent for fellowship resources for the Pentecostal Assemblies of Canada.

Ball believes Christian congregations have a spiritual and corporate responsibility to work for their communities and demonstrate good citizenship. The motive cannot be for the purpose of gaining the world’s favor, he says, but for the purpose of living out what Christians profess to believe.

“If we exist to lift up the fallen, set the captives free and proclaim good news to the poor, we are challenged to contribute practically, creatively and cooperatively to the communities whose benefits we enjoy,” he says. “This goes beyond paying or not paying taxes. The world will follow Christ not because we make rational arguments, but because they see us living out what we say we believe.”

The argument for exempting churches from paying property taxes is, however, vulnerable if it’s based solely on the “advancement of religion,” a term used a century ago to qualify both places of worship and other religious institutions such as seminaries from paying property taxes. With plummeting church attendance and growing secularism, churches can not simply assume the public will see the public good that flow from local congregations.

Promise to deliver
In an era where some congregations convert their properties to meet social needs such as affordable housing while others sell theirs to developers for condominiums or shopping centre (sometimes moving their congregations to suburban areas where, again, their church property are not taxed), ensuring a church’s impact is seen can be challenging.

Ontario alone has more than 35,500 properties exempted from taxes with an assessed value of $76.6 billion in 2003. The best strategy for churches to maintain their property tax exempt status is by delivering on the promise that places of worship benefit their communities.

Tax assessors will always look for signs that church properties are not being used for worship or ministry as Toronto’s Holy Trinity Church found this out last summer. The congregation was bewildered when two adjacent buildings owned by the Anglican Archdiocese of Toronto and considered part of the church were issued tax bills. It took considerable time and energy by the church’s leadership to convince tax assessors that the buildings were exempt from property taxes.