Mayor of Matamata-Piako says while the council has accepted that businesses will not be taxed on the number of toilets they have, a fairer system of charging for waste water has to be found.
The local council had suggested a move to a user-pays system where properties with more than one toilet pay $680 for each one.
However chief executive of Te Aroha Community Hospital in Waikato, Nicky Close, said that would mean the hospital's wastewater costs would go from about $600 a year to $12,000.
Ms Close said the only way it could make ends meet if the toilet tax comes in, would be to cut its day-care service for the elderly.
The council is now suggesting that businesses, schools and motels be metered and charged based on the amount of water used, equivalent to an average household.
Mayor Hugh Vercoe says the so-called pan tax was only a suggestion to help the council fund new wastewater treatment facilities in the district, which cost $25 million.
He says the council could have just charged each ratepayer an extra $200 on top of a flat rate of nearly $600 they pay annually.
But Mr Vercoe says that would not be fair because a person living in a small flat ends up paying the same as the local pub.
