HALIFAX -- Matina Aucoin says she can't understand why she has to send $3,800 a year in property tax to her city government for a parking lot that requires no service.

"I know it costs the city zero," she says in an interview at the Zephyr furniture shop on Halifax's Quinpool Road.

It's the kind of tax complaint that is causing some main street entrepreneurs across the country to argue municipal property tax assessments -- a crucial source of funds for Canadian cities -- are urgently in need of reform, especially in an era of real estate price volatility.

Zephyr is located amidst an assortment of mostly locally-owned organic grocers, restaurants and clothing boutiques that resembles other downtown or suburban main streets.

As the selling price for local buildings rose rapidly in recent years, assessments for Aucoin's building and 450-square metre parking followed suit. Until a recent appeal, she was paying $5,000 a year for pavement based on its potential resale value.

"We are in a precarious position because someone can come in and pay too much for a property, which they did next to me and down the street ... and our taxes shoot up," says the 48-year-old entrepreneur, who estimates her overall annual bill went from $10,000 in 2007 to $22,000 this year.

Andrew Murphy, a chartered accountant in Halifax's north end, has been spending his spare time comparing assessments of big box areas and residential taxes against those charged on various downtown streets.

"Essentially the nature of the problem is you get great big areas in business parks being taxed way less than really compact areas of the city," he said in an interview.

Glenn Castanheira, a former director of the business association for Montreal's Boulevard Saint-Laurent, says his parent's Portugese rotisserie Coco-Rico has seen its annual taxes rise from $5,300 annually to $11,800 over the past decade due to speculation in 2006-2007 as city streets were improved.

"In many cases we had taxes that doubled and tripled," he said. "Mom and Pop shops like my parents ran couldn't start up today."

Castanheira, who works as an economic advisor to the opposition councillors in the City of Montreal, says taxing business income might be a way to lessen dependence on commercial property taxes.

"Being so dependent on property taxes mean we're choking our businesses," he said.

Bruce Fisher, manager of fiscal and tax policy for Halifax Regional Municipality, said property taxes were created to be a wealth tax, and building owners may eventually be able to sell their properties at a profit.

He says arguing small businesses in urban areas are unfairly taxed compared to malls and big box areas may fail to take into account the different kinds of buildings in each area.

"Can we conclusively say one area is paying more than an another and that's it unfair? It's pretty hard to be that concise on it. We're seeing a very varied pattern (in tax assessments)," he said.

Halifax city council voted in April for staff to examine possible changes to the commercial tax structure that consider issues like the ones Aucoin and Murphy are raising, and staff are expected to report back this fall.

Fisher says one possibility is to create a two-tier system such as Toronto's, where an initial portion of the building's value receives a lower tax rate.

John Kiru, executive director of the Toronto Association of Business Improvement Areas, says retail streets in his city banded together to push for a lower tax rate on the first $1 million of assessed property.

But he says the wider issue of a bias against small, locally owned downtown retailers remains.

"As developers buy up those last couple of parcels of land for their assembly they have a tendency to overpay and it's that overpayment that adds pressure on land in the downtown which pulls everyone else's assessment up," he said.

Peter Tomlinson, a consultant who teaches a course in urban economics at the University of Toronto, said the simplest solution is to lower commercial property tax rates in general, bringing them more in line with residential rates.

"In the City of Toronto, they are gradually shifting it to residential, given it's still three times higher for business than residential," he said.

Fisher said the result of that approach would likely be a hike in residential rates or a cut to services, but he adds that cities are going to have to consider various options in light of complaints like the one Aucoin are bringing forward.

"These are fair questions they are raising," he said.