B.C. RESIDENTS END UP BEING THE ‘SPECULATORS’
It remains unclear how the tax will free up more affordable housing
When the New Democrats announced a “speculation tax” in this year’s budget, they insisted the target was neither B.C. taxpayers nor provincial residents who owned recreational properties.
“If you pay income tax in B.C., you are not captured. If you’re from outside the province and you leave your home vacant, you will be taxed,” said Finance Minister Carole James on Feb 22, two days after tabling the budget in the legislature.
Premier John Horgan expanded on that point the following day.
“If you pay tax in B.C. you are not speculating from outside B.C.,” he told the Greater Vancouver Board of Trade. “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.”
Alas for the premier and the minister of finance, their statements were immediately contradicted by the tax information sheet from the Ministry of Finance.
It indicated many B.C. taxpayers would be treated as speculators if they owned second properties. Though Penticton was not targeted, many communities with sizable amounts of recreational property were included in the area of coverage for the speculation tax.
As protests multiplied, the New Democrats retreated. In March, they exempted many island and coastal communities from the tax. The levy was reduced to one per cent of assessed value for Canadians and 0.5 per cent for British Columbians, leaving only foreigners paying the full amount of two per cent.
Weirdly, while changing both the range of the tax and the rates, the government did not change the projected revenues of $487 million over three years, suggesting the number was no more than a guess in the first place.
They did come up with a new pitch, insisting that “more than 99 per cent of British Columbians” will be exempt from the tax.
But that claim was cast in a different light by a recent admission from Finance Minister James, during debate in the legislature on her ministry budget.
Asked point blank for the actual number of British Columbians who would be paying the speculation tax, she took a day to retrieve the answer then disclosed the following: The Finance Ministry estimates that some 32,000 homes will be captured by what is, in effect, a tax on places left vacant. Of those, 20,000 are owned by British Columbians, another 2,000 by Canadians from other provinces, and the remaining 10,000 by foreigners.
So what was sold to the public before and after the election as a tax on foreign property speculators will instead hit mostly British Columbians. They’ll make up almost two-thirds of the so-called “speculators” while those nasty foreigners count for about 30 per cent.
Granted, the foreigners and Canadians from other provinces will pay more — about $140 million a year — because they will be taxed at a higher rate. But the share of revenues to be taken from British Columbians is nevertheless significant: an estimated $60 million a year in taxes on $12 billion worth of secondary homes and recreational properties.
James’ justification? “Speculation in the housing market really describes people who have the ability to use the housing market as a stock market. They’re taking housing out of the market. They’re utilizing it by leaving it vacant. They’re not utilizing it for housing. They’re not renting it out. They’re not occupying it. They’re leaving it vacant in high, unaffordable areas.”
Nor did she back off when the B.C. Liberals challenged her comparing longtime owners of secondary homes and recreational property to speculators playing the stock market.
“Are people who hold multiple properties in urban areas and leaving them empty benefiting from substantial appreciation in home prices?” the finance minister asked rhetorically.
“Yes, they are. Is that a form of speculation when you’re hollowing out communities, when you’re taking housing out of the market, when you’re not utilizing it in an area? Yes, it is.”
Besides, “if individuals are concerned about the speculation tax, they have the ability to not pay the speculation tax by renting their property out for six months of the year.”
Turning to the results of opinion polls and her own mailbox, she boasted how “we’ve seen the thousands of people who support the direction that we are taking around the speculation tax, who support ensuring that people have an opportunity to be able to have affordable housing.”
Convenient as that line of defence is for James, it’s not clear how taxing 20,000 British Columbians who own secondary homes and recreational properties will free up more affordable housing in the province.
As for the popularity of the so-called speculation tax, you have to wonder how much of that is a result of the misleading name and the false impression that the main target is foreigners.
Similar questions were raised by the new surcharge on the school tax, which actually goes into general revenue, not directly to schools.
Now this week comes evidence from a survey of the business community that the new payroll tax will bite a larger share of small and medium-sized employers than the mere 15 per cent claimed by the New Democrats.
It’s all in the naming and packaging.
Maybe the bridge tolls could have survived the cut if dumped into general revenue and rebranded as “support for expanded child care.”
Just kidding.
They have the ability to not pay the speculation tax by renting their property out for six months of the year.
CAROLE JAMES, finance minister