COULD SPECULATION TAX PENALIZE B.C. RESIDENTS?

It’s not yet clear if full refunds would apply to owners of multiple properties

Ten days after launching a tax on real estate speculation, the New Democrats are still working out an exemption for British Columbian owners of both homes and rental property.

The tax kicks in this year at a rate of one half of one per cent of assessed value, rising to two per cent in 2019, when the annual bite on a milliondollar property would hit $20,000.

The information sheet put out by the finance ministry after the Feb. 20 budget defines speculators as residential property owners “who have removed their units from B.C.’s long-term housing stock — meaning they are not owner-occupied or a qualifying long-term rental property.”

The levy embraces both “foreign and domestic speculators,” including satellite families, defined as “households with high worldwide income that pay little income tax in B.C.”

The decision to include Canadians from other provinces came as a bit of a surprise, but Finance Minister Carole James confirms they are as much a target as speculators from overseas.

“That’s right,” she told me when I asked if the tax would apply to the Alberta resident who winters at a condo in Victoria or summers at a cottage in Parksville.

“Unless they rent their house out, unless it’s in the market and the house is part of the rental market longterm, not short-term rental, so it’s actively becoming a part of our communities and providing the kind of supply that we need. But otherwise, if they’re not paying (income) taxes in our province, they’ll be paying the speculation tax.”

But there will be an exemption for income-tax-paying British Columbians, even if they own a principal residence in one B.C. community and a sometimes-occupied recreational property in another.

“They will not be captured,” James assured me during an interview last week on Voice of B.C. on Shaw TV. “There’ll be a refund coming on their income tax form. They won’t have to pay it because they pay taxes in our province.” So says the minister.

But the fact sheet from her ministry raises a caveat.

Question: “What about British Columbians with two homes? A resident who lives in Vancouver and owns a vacation property in Kelowna?”

Answer: “A non-refundable income tax credit will help offset the tax for B.C. residents. This will leave the bulk of the tax levied on vacant and short-term rental properties owned by individuals who do not live in B.C., as well as satellite families.”

The tax credit will “help” offset the tab for B.C. residents. But that’s not the same as fully exempting them from paying or guaranteeing a full refund.

Take the example of a British Columbian who pays $7,000 in provincial income tax and faces a $20,000 speculation tax levy on a $1- million recreational property that has been in the family for years.

Would he/she get back only the first $7,000 of the $20,000? If so, it would leave him or her $13,000 behind on the transaction and feeling anything but exempt from a tax that was supposedly crafted to deal with outside speculators.

But when I put that scenario to the finance ministry this week, I was told that it was not possible to provide a definitive answer for how refunds would be handled under the speculation tax.

The ministry is still working on the right mechanism to offset the tax for qualifying British Columbians.

A number of British Columbians could be affected by anything less than a 100 per cent exemption or refund.

The speculation tax will apply to the Metro Vancouver, Fraser Valley, Capital Region and Nanaimo Regional Districts, and in the municipalities of Kelowna and West Kelowna.

The Capital Regional District is prime territory for high-priced recreational property, including as it does the southern Gulf Islands of Saltspring, Mayne, Saturna, Galiano and North and South Pender. The Nanaimo Regional District presents a target-rich environment for the tax collectors as well, for it includes Parksville, Qualicum, Lantzville, Nanoose Bay and Gabriola Island.

Already examples are turning up of holders of recreational property who are looking at having to pay thousands of dollars in speculation taxes up front, against the possibility of getting only some of it back by way of a refund.

Meanwhile complaints are surfacing from Albertans and residents of other provinces who own recreational property here, angry at being treated as foreign speculators in their own country.

I’ve even heard speculation about a constitutional challenge. But when I asked Attorney General David Eby about the possibility Thursday, he said there is precedent for provinces treating their own residents differently than other Canadians.

Quebec gets away with charging higher university fees to students from other provinces. In Prince Edward Island, Canadians from elsewhere need the permission of the provincial cabinet to buy waterfront property or tracts larger than five acres.

On Thursday I characterized anti-fish farming crusader Alexandra Morton as “a longtime associate and supporter” of Agriculture Minister Lana Popham.

Morton says she is not a longtime associate of Popham. I am happy to correct the record on that point.

She also said she does support Popham’s stance on fish farming and regards her as “brave” for raising the issue. Morton also confirmed that she was the author of the email to Popham quoted here yesterday — the one that rang the alarm bells about the imminent restocking of the Marine Harvest fish farm in the Broughton Archipelago.

Complaints are surfacing from Albertans … who own recreational property here, angry at being treated as foreign speculators.