Income anomaly depletes tax base
Disparity: Canada failing to crack down on mansion owners who plead poverty on par with the Downtown Eastside
Who will pay the taxes for universities, health care and rapid transit if residents of some of Metro Vancouver’s exclusive neighbourhoods are reporting poverty-level incomes?
Some homeowners in tony parts of the west side of Vancouver and Richmond are claiming to have income as low as people struggling in Vancouver’s poor Downtown Eastside.
The tax unfairness caused by the growing phenomenon of mansion owners alleging poverty can be traced largely to Canada failing to catch trans-national migrants who refuse to report their total global income at tax times.
A study by University of B.C. geographer Dan Hiebert shows the problem is worse in Metro Vancouver than in Montreal and Toronto. It’s the unintended consequence of Metro becoming a popular destination for those who gained a Canadian passport through the business-investor immigrant program.
Statistics Canada data shows the upscale neighbourhoods in Metro where more than 30 per cent of adults are reporting poverty have a high proportion of immigrants, writes Hiebert.
The most contradictoryappearing “low-income” area of Metro Vancouver is the elite tree-lined west side neighbourhood of Shaughnessy-Arbutus Ridge.
It includes Prince of Wales Secondary School, Quilchena Park and the luxurious hillside houses north of 37th Avenue, which typically sell in the $2-million to $6-million range.
The neighbourhood ( which StatsCan technically calls a “census tract”) south of Oakridge Shopping Centre also has a curiously high proportion of residents reporting poverty, even though most people there own either expensive houses or stylish condominiums.
In addition, a large collection of adjacent neighbourhoods in north-central Richmond, where roughly 40,000 people tend to own either pricey houses or condos, has an unusually strong percentage claiming low incomes.
Hiebert’s study, for the Institute for Research on Public Policy, dovetails with the findings of Vancouver mathematician Jens von Bergmann, formerly of The University of Calgary.
Von Bergmann found 25,000 households in the city of Vancouver alone, almost one in 10, declare less income than they spent on their housing costs. His maps, published by the South China Morning Post, show most are in the west side.
Both Hiebert and Von Bergmann discovered most of the Metro neighbourhoods where residents own expensive houses but many declare low income contain a much higher than Metro average of visible minorities, particularly of Chinese origin.
Immigration Canada is aware of the reported-earnings anomaly. It released data this year showing refugees to the country appear to earn more income on average than the hundreds of thousands of immigrants who have arrived via the businessinvestor program. The latter were required to temporarily invest $800,000 in Canada.
Many of the Metro households in fashionable neighbourhoods that claim low incomes appear to follow the well-documented “astronaut” scenario of investor immigrants, in which husbands often work offshore while their school-age children live in Canada.
UBC geographer David Ley says Canada’s business-investor immigration programs have led to “200,000 people coming to (Metro) Vancouver … in the last generation.”
In Millionaire Migrants: TransPacific Life Lines, Ley cites a Chinese-Canadian Historical Society report that two of three Hong Kong males who obtained a Canadian passport work and live outside the country. A Citibank official in East Asia estimated only 10 per cent of transnational migrants’ assets are initially transferred to Canada.
The tax implications for Canada are disturbing. How many Canadians who are rich in assets and property, but low in reported income, are not paying their fair share for public services. How many are even receiving welfare cheques and GST refunds because they are “poor?”
Almost six of 10 residents of the supposedly low- income neighbourhood of ShaughnessyArbutus Ridge are foreign born, according to an interactive map created by former Sun digital reporter Chad Skelton.
The residents are 50-per cent ethnic Chinese, 34 per cent white and eight per cent Korean.
In the “low-income” neighbourhood south of Oakridge shopping centre, between Granville and Cambie, the percentage of those who are foreign born rises to almost seven in 10. Based on ethnicity, 69 per cent are Chinese, 19 per cent are white and five per cent South Asian.
The conglomeration of north Richmond neighbourhoods that appear “low-income” to StatsCan is also generally more than 70 per cent foreign born, including roughly three out of four who are ethnic Chinese, with some whites and South Asians.
One of the many unusual things about these apparently “lowincome” neighbourhoods is that they are not, like the Downtown Eastside and Burnaby’s Metrotown, dominated by rental housing. The rate of home ownership among immigrants in these technically “poor” Metro neighbourhoods is extremely high compared to Montreal and Toronto, according to Hiebert.
Former Richmond mayor Greg Halsey-Brandt and Albert Lo, head of the Canadian Race Relations Foundation, are worried about the many problems related to wealthy property owners not fully reporting or paying taxes in Canada on their global income. Even though such homeowners pay municipal property taxes, Halsey-Brandt said, many appear to not be paying an appropriate share of provincial and federal income taxes, which fund highways, transit, universities, hospitals, the CBC, welfare, immigrant-support organizations and much more.
Lo wants the Canada Revenue Agency to more closely examine the earnings of immigrants who “park large amounts of money” in Canadian real estate and then “go back to work in China” or elsewhere.
Even though the federal government last year cancelled the immigrant-investor program that is largely responsible for this tax inequity, a back door remains. Rich immigrants continue to be accepted by the thousands into Quebec’s businessinvestor program, but most move to Metro Vancouver.
And although Ottawa brought in legislation in 2013 that required Canadians to declare their foreign assets, Vancouver immigration lawyer Samuel Hymn said neither the federal nor B.C. governments are cracking down on people who pay sky-high prices to buy Canadian houses but don’t pay taxes on global income.
That goes for both overseas property owners who are avoiding taxes through a legal loophole — by becoming non-residents for income tax purposes, for example — and for those residents acting outside the law by not reporting global income, Hyman said.
One common example of the tax unfairness that arises with dual passports is in regards to higher education.
A key reason migrants yearn to become citizens of Canada is so their children can attend its English-language universities.
But if supposedly dual-passport parents who appear poor because they’re not reporting their global assets are at the same time sending their children to Canadian universities, it means they’re not contributing to the tax base for their children’s subsidized education.
This dual-passport inequity also applies to many students with both Canadian and U.S. citizenship. Many of their parents no longer reside in or pay taxes in Canada, but the children still cross the 49th parallel for a relatively inexpensive, Canadian-taxpayer-funded higher education.
That’s just one of numerous tax injustices that come with dual citizenship, which Canada, says Hyman, has so far been a laggard in stopping, compared to other more tax-pursuing countries like Britain, Australia, New Zealand and the U.S.
In Canada, unfortunately, resistance to forcing foreignasset disclosure has long come from all political sides.
Advocates of economic globalization, like the Vancouver Board of Trade and B.C. real estate magnate David Choi, have traditionally opposed foreign-asset disclosure laws, says Millionaire Migrants.
But even left-wing stalwarts, such as Vancouver New Democrat Jenny Kwan, have spoken against foreign-asset disclosure legislation, in the name of intercultural sensitivity.
Non-disclosure of assets is a cultural trait of ethnic Chinese, Kwan is quoted saying in Millionaire Migrants. “The Chinese are very private about their money.” A law requiring them to disclose assets, Kwan said, “goes against our culture.”