In defence of the defunct non-resident property tax
Aloud chorus of disgruntled non-residents expressing outrage about the provincial government’s proposed non-resident tax rocked the boat, and then sank it earlier this month. I remain in favour of tax increases, but not for the reasons put forward so far. The increases need to be put in a context that I believe most Nova Scotia residents, including MLAS across all parties, will appreciate, and, hopefully, non-residents, too.
So, in the name of remaining fundamentally open to the critical assessment of any position, let’s look at some of the arguments in favour of a non-resident tax, starting with the Capped Assessment Program (CAP) in Nova Scotia.
The vocal group that claims to be speaking for 27,000 non-residents in Nova Scotia contended that they were already unfairly targeted and penalized with uncapped property tax assessments. I want to show why the CAP isn’t as it seems to non-residents.
THE CAP ILLUSION
In Nova Scotia, provincial legislation limits, or “caps,” the annual taxable assessment for eligible residential properties. The CAP rate is based on the Nova Scotia Consumer Price Index, published every November (in 2022, it was 5.4 per cent; in 2021, 0.3 per cent).
The website of the Property Valuation Services Corporation (PVSA) notes that if a property is owned or majority-owned by an out-of-province resident, it is not eligible to be capped. But there are always ways to sidestep this rule. The most obvious is using a local address for the owner’s tax bill, as the PVSC doesn’t have the time or resources to verify it. Still, even when property assessments are uncapped, the increases often tend to be insignificant when the property remains in the hands of the same owner.
One only need visit Nova Scotia’s informative website (viewpoint.ca) to get confirmation that the uncapped increases in many areas are usually miniscule, as assessed values have hardly changed, even in the current market (unless, of course, the PVSC is aware of significant material changes made to the property).
Visitors to viewpoint.ca can see every taxable property in Nova Scotia and get the most up-to-date statistics, including assessed values and taxes. For a small fee, you can find out who owns the property. In some respects, this is democracy at its best, though some may see it as an invasion of privacy.
To illustrate my view that non-residents are usually not at an undue tax disadvantage, take Port Hood Island (PHI), a place I know well because I had a property there and still have family who summer there. PHI (across from the village of Port Hood) was once a thriving fishing community, which collapsed in the 1960s. Today, almost all the properties in PHI are owned by non-residents, domestic and foreign (American).
Viewpoint.ca informs us that all PHI property assessments, including foreign, are modest at best. Ironically, the highest assessed property and the one with the highest taxes ($1,742 on an assessed value of $170,000 but capped at $126,000) is a modest house owned by a resident on a mere acre of land with no waterfront (it’s currently on the market for $625,000). Properties, on the other hand, owned by Americans, which include expensive homes on the water with acreage, mysteriously have lower assessed values and lower taxes.
Despite their existing low taxes (some assessed values and taxes have hardly changed in years), many nonresidents on PHI still feel they are overtaxed. Yet, these fortunate people enjoy bucolic settings that boast some of the nicest beaches in the area.
It would be interesting to know the true number of non-resident properties in Nova Scotia, but this will likely never happen as, according to an assessment officer, it would require issuing affidavits in suspicious cases.
Whatever the case, viewpoint.ca clearly shows that many non-resident properties, foreign and domestic, are assessed and taxed at a pittance of their true value, which may explain why many have multiple properties (vacant land) purchased and carried for a song!
BRACKET CREEP
One argument that was rarely raised in favour of the tax is that Nova Scotia residents are subject to the highest provincial income taxes in Canada and, even then, the basic exemption and provincial tax brackets are not adjusted to inflation as they are in other provinces. This is an egregious practice many Nova Scotia taxpayers are unaware of (imagine if your OAS or CPP payments were not adjusted to inflation). But my point here is that new non-resident taxes would help level the playing field.
Consider the following. Over 90 per cent of Nova Scotians had a total income (including capital gains) under $90,000 in 2019, the year before COVID-19 hit. But even those with an annual income of $100,000 (roughly top eight per cent) would only net around $65,000 after taxes and other deductions, which would hardly make them rich. Nova Scotians pay over 50 per cent more in provincial income tax on $100,000 than do Ontarians ($13,142 vs. $8,364 in 2021), and this will only get worse since the tax brackets, as I just noted, are not adjusted to inflation.
To add to the disadvantage, many non-residents come to Nova Scotia seeking properties with a bonanza of cash after selling properties in Ontario and elsewhere. They make offers that go well beyond asking prices, which were already unimaginable in the eyes of most Nova Scotians.
Many will say it is a national trend and not just the case in Nova Scotia. But given the price-to-income ratio in the province for residents, Nova Scotians remain at a distinct disadvantage even when “competing” with domestic
non-residents.
HOME AFFORDABILITY
There was a time not so long ago when almost every family in Nova Scotia could afford a home, however modest, and often a small cottage, too. It is now a luxury for many to aspire to buy a home — and this includes those in a higher income bracket in Nova Scotia.
Unsurprisingly, new research from the Bank of Canada shows investors account for about one-fifth of home purchases in Halifax. I suspect it may be even higher for rural or waterfront properties. But even here, there is a major difference between those who pay their provincial income tax in Nova Scotia and those who don’t (even when they can and should).
This brings me to the outrage expressed by some non-residents regarding the proposed property tax. While some concerns are understandable, especially from those with modest incomes and roots in the province, the vitriol spewed by others exposed a disturbing depth of ignorance and arrogance, as if the oldest settled province in the country was a struggling backwoods until some outsiders came to the rescue with their bags of money and sophistication.
The once sleepy port of Halifax is now the fastest growing city in the country, thanks in no small part to immigration. But Halifax and Nova Scotia have also attracted many nonresidents from Canada and elsewhere, as it is seen as one of the safest, most beautiful, culturally rich, and inexpensive places to own a home. However, it’s not the locals causing the price frenzy.
I recently noticed small waterfront building lots on the Bedford Basin listed for $1.5 million, and, yes, they are being bought up. Not, I bet, by locals. In Port Hood, someone just listed a three-acre property on the water with 310 feet of beachfront for almost $3 million. The fact that beaches in the area are public makes this price even more astonishing.
There are also many gated communities in Nova Scotia that were created by foreign speculators who purchased large properties by the sea, divided them into multiple lots, and sold them to foreigners and/or to those who have no roots here. Generally, these have become closed communities that are not part of the local social fabric.
THEY DOTH PROTEST TOO MUCH
Then there’s the non-residents whose families have come here for generations and many have contributed to local communities for years. They feel they should not have been subject to the new taxes, whatever the assessed values of their properties. There are others who claim it is simply un-canadian to penalize Canadians wanting to purchase properties anywhere in the country, and others yet again who assert that no non-resident, foreign or domestic, should be subject to any “special” taxes. Such a pileup!
I’m not sure who wins the prize for the best performance in the tax drama, but there are some outstanding nominees. Consider this: After Economic Development Minister Susan Corkum-greek outlined in a letter that the seasonal real estate industry was “squeezing out our own residents,” an irate non-resident, Ian Lightstone, in his intervention before the legislature’s law amendments committee, accused the minister (and by extension her supporters) of harbouring “Nazi-like” characteristics because all Canadians should be treated equal.
More important, since the complainant claimed to be living in Nova Scotia seven to eight months of the year, perhaps Nova Scotian residents should ask why he isn’t paying his fair share of provincial income tax here, as one’s province of residence is generally based on the location of one’s most significant ties (in Nova Scotia, it is when one is present in the province 183 days of every calendar year). The reason may reside in the substantial difference in provincial income tax between Ontario and Nova Scotia.
And then there is Noah Richler who, we are told, divides his time between Toronto and Sandy Cove, on Digby Neck. In a stinging diatribe in The Chronicle Herald, Richler lambastes the Progressive Conservative government and their supporters for being “discriminatory, counterproductive and unfair.” He draws attention to the tender loving care he gave to restoring an old home, and his contributions to the local community, and I applaud him for this, although he makes it sound like Nova Scotians, good grief, don’t do such things.
Moreover, Richler takes Nova Scotians and their political parties to task for showing little distinction between Liberals, Conservatives and New Democrats. For Richler, we live in a “politically confusing province.” If anything, this may be a testimony to the civilized spirit of Nova Scotians, that they can put their political differences aside and come together on issues for the common good. It’s part of our social fabric!
Richler, meanwhile, could have avoided the unwanted tax or similar future affronts by simply choosing Sandy Cove rather than Toronto as his permanent residency.
There was also a group of local business owners in Chester led by the gourmet restaurateur Nicola Boyd. Boyd, again in The Chronicle Herald, expressed her concern that the seaside mecca and other thriving rural areas in Nova Scotia would once again become abandoned and downtrodden as indignant non-residents and foreigners decamped and moved elsewhere. Richer also echoed this doomsday scenario.
Better still, a Facebook page called “Keep Nova Scotia Open!” was created by the disgruntled cohort. It’s worth visiting, just to read the absurd assertions, including one that students from away will no longer want to come and study here. I’m surprised cruise ships were not added to the list of dreadful consequences that would have resulted from a non-resident tax.
Not to be outdone, a German developer, Rolf Bouman, claimed in The Cape Breton Post that he had so many upset German customers that he was closing his cultural initiative, Friends United International Convention Centre, in Cleveland, Cape Breton, which supports and promotes Indigenous artists. Bouman developed 1,800 lots in the area. One of his listed properties, according to the Post, is a lakefront property with an asking price of $3,850,000.
It’s a shame the government was cowed by a loud chorus, motivated first and foremost by their own selfinterest, and not strictly speaking the well-being of Nova Scotians. Since Nova Scotia is the only province in Canada where the basic exemption and provincial tax brackets are not adjusted to inflation, it’s high time that the government switched its focus to make resident taxpayers the most urgent priority.