SPECULATING ABOUT TAX
NDP’s message mixed: Palmer
When the New Democrats launched their tax on real estate speculation last month, Premier John Horgan was adamant about not treating British Columbians as speculators in their own province.
The tax was aimed at foreigners and residents of other provinces. Even if people lived in one part of B.C. and owned recreational property in another, they would not be captured so long as they already paid provincial income taxes.
“If you pay tax in B.C., you are not speculating from outside B.C.,” he told an audience at the Greater Vancouver Board of Trade on Feb. 23, three days after the budget. “If you have a home in Vancouver and a home in Penticton that you visit in the summer or to ski in the winter, that would not fall in with the out-of-province speculation tax.”
Set aside that Penticton is not within the initial target zone for the speculation tax — those being the Capital, Nanaimo, Metro Vancouver and Fraser Valley regional districts, plus the municipalities of Kelowna and West Kelowna. The premier’s point nevertheless being that a British Columbian with a residence in one community and recreational property in another would not be taxed as a speculator.
But a fact sheet on the speculation tax posted on the finance ministry website tells a different story.
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.”
Note, the non-refundable tax credit will HELP offset the speculation tax. But it won’t fully offset it unless the amount paid in speculation tax is less than the amount paid in provincial income taxes.
For instance, the speculation tax, calculated at two per cent on assessed value, would levy $20,000 on a $1-million recreational property. But a British Columbian with an income of $100,000 a year would get back only the $7,000 or so that he or she would be paying in provincial income taxes.
When I raised that likelihood in a column last week, I heard from numerous British Columbians concerned that they might be facing a big bite from a tax that was supposedly crafted to target foreign and out-of-province speculators.
From one who divides his time 50/50 between a residence in Maple Ridge and a place on Mayne Island:
“This is a horribly scary tax and could be the death of Gulf Islands economies . ... My review of a sample of 72 properties shows up to 74 per cent could be affected. I have spoken to many people and find that a large percentage do not understand the tax or its implications.”
From a Vancouver Island resident with a condo in Vancouver: “If the proposed speculation tax proceeds as you describe, the two-per-cent tax will far exceed the B.C. income tax that we normally pay. We will have no choice but to sell our Vancouver condo. We’re not speculators. We simply wanted to enjoy a few days a month in the city we used to live in, in the comfort of our own condo.”
On the problem for seniors with recreational properties that have been in the family for years: “If they pay zero income tax because their annual income is low enough to warrant no tax — i.e. married couple making around $25,000 or so — they’d never recover the amount.”
From someone with a place on Saturna: “They call it a speculation tax, but it seems more like an empty home tax. The government claims that taxing homes which remain empty most of the year will help deal with the housing shortage. If that is the case, why isn’t Whistler included? The prices are skyrocketing and there is a real housing shortage for workers. On the other hand, they include a Gulf Island like Saturna, where there isn’t a housing shortage and housing prices haven’t risen in more than eight years.”
On the perverse incentives of a tax vis-a-vis longtime residents versus actual speculators: “If you speculate and sell the property quickly, you pay the tax once, while those keeping property for years pay years of tax. The short-term speculators win!”
From someone with a place on Bowen: “Kelowna, the Gulf Islands and Bowen Island have many vacation or second-home properties and this sudden change may have a sharp negative impact on property values as families scramble to part with a property they can no longer pay the annual taxes on. In the small island vacation home areas, often the most expensive homes such as waterfront are second homes. The year-round residents live inland as this is more affordable. As the value correction occurs, the waterfront properties will drop in value relative to the inland properties, shifting the property tax burden toward the more affordable properties.”
From a reader who contacted the office of Green Leader Andrew Weaver to complain: “See the uninformed and outright erroneous email response I just got from Andrew Weaver’s office, assuring me: ‘This tax does not apply to British Columbians — anyone who pays income tax in B.C. is exempt. You are able to own multiple homes without being subject to the tax.’”
In fairness to the NDP’s partner in power-sharing, maybe Weaver took the word of the premier, rather than reading what the finance ministry says about how the speculation tax will affect British Columbians.
If you speculate and sell the property quickly, you pay the tax once, while those keeping property for years pay years of tax.