City staff are recommending a 4-per-cent tax for both hotels and short-term rentals such as Airbnb.

Council endorsed a hotel tax at 4 per cent and up to 10 per cent for short-term rentals last year. Provincial legislation enacted in May made collecting that tax possible.

In considering two types of taxes — one for hotels and motels and one for short-term rentals — they settled on taxing them equally.

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“Staff propose that a tax rate of 4 per cent, equal to the tax rate on hotels, would bring a reasonable degree of parity between hotel and short-term rental accommodation,” a staff report tabled at executive committee reads. “A tax rate closer to 10 per cent may be perceived as punitive on these homeowners, act as a disincentive to comply with regulations, and potentially drive them into the underground market.”

The report will be up for debate at executive committee on Jan. 24. Council will have the final say at a meeting that begins Jan. 31.

The Greater Toronto Hotel Association and individual short-term rental companies would be responsible for collecting the tax on behalf of the city.

Last year, the GTHA’s president and CEO, Terry Mundell, said in a statement that a hotel tax in Ontario “has the potential to seriously reduce the competitiveness of Ontario’s tourism sector,” opposing the implementation of such a tax on its members.

The city would be required to remit some of the tax collected to Tourism Toronto, an arms-length agency. The exact amount required to be transferred has yet to be worked out.

For 2018, the city earlier assumed the new tax would raise $37 million, $20 million of which would go to Tourism Toronto and $900,000 to administering the new tax scheme, leaving the city with $16.1 million in net revenue.

Staff calculated on an annual basis, the new tax proposed could bring in between $17.2 to $28.2 million net.

The hotel tax would come into effect in April and the short-term rental tax would coincide with newly approved regulations expected to be in place in June, the staff report said.

For hotels, the tax would only apply to what is defined as “sleeping rooms” and not to rentals for conference rooms or other event spaces and will only apply to stays of 30 days or less.

Other types of rooms will be exempt; for example, hotel and motel spaces paid for by the city as temporary shelter for refugees and the homeless.

Bed and breakfasts, the staff report says, would be treated like short-term rentals rather than hotels.

The executive committee will also consider another staff report on tax relief for small businesses who were hit with extraordinarily high assessments last year.

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Staff have recommended capping property tax increases in 2018 at 10 per cent over last year for commercial, industrial and multi-residential tax classes. Staff would review what can be done in future years.

According to a staff report, 5,415 properties experienced a tax increase greater than 10 per cent in 2017, 424 properties saw increases of 50 per cent or more and118 properties saw increases of 100 per cent or more.

Both a hotel tax and the cap on property taxes for businesses are supported by Tory and have broad support on council.