This is not to say there is nothing to debate in the B.C. NDP’s 30-point plan to ease the devastation of unaffordability, which it inherited from the laissez-faire Liberals’ 16 years in power. But it takes time to put together a complete picture.
Even as a journalist who for five years has covered the way extreme prices are crushing the hopes of hundreds of thousands of British Columbians, I learned new things from a recent Vancouver Sun and Province editorial board meeting with Attorney General David Eby.
The Point Grey MLA, whose riding is ground zero for the stratospheric prices that result in large part from the globalization of wealth, rang some of the earliest warning bells about the lack of affordability. And he’s been teaming up with Finance Minister Carole James to respond.
Eby is fully up to speed on the government’s 20 per cent “foreign buyers” tax, its proposed “speculation tax” on vacant dwellings, its expanded “school tax” on high-end properties and its efforts to close loopholes that allow the rich to buy mansions while obscuring their real identities, often to avoid paying property-related taxes.
There has been pushback. Liberal MLAs, the house-rich, some pundits and even the B.C. Greens are either fulminating against the policies — claiming they’re acts of class warfare and even xenophobia — or just trying to pick holes in them.
But the B.C. public is applauding. Two of three Metro residents told Angus Reid pollsters last week that housing is the region’s most important issue and they want government action on it.
More than four in five British Columbians support the foreign-buyers tax, the intention to collect information on where buyers come from and the “speculation” tax on unoccupied dwellings, says Angus Reid. Two of three also back the “school tax” surcharge on houses worth over $3 million.
The devil in combating unaffordability is in the details of tax policy. And Eby said the challenge is not unique to B.C., mentioning how Hawaii levies higher taxes on non-resident buyers. He could have cited similar tax measures in New Zealand, Singapore and London, which are also desirable locations for high-net-worth individuals.
The aim running through many of the new housing measures, Eby made clear, is requiring house owners who pay little or no income taxes in B.C., while enjoying government services, to cough up more in property-related taxes.
That’s why, Eby said, the NDP changed the B.C. Liberals foreign-buyers tax from tracking the not entirely relevant “citizenship” of a buyer to targeting whether he or she pays income taxes in Canada.
The B.C. NDP are taking political heat for preparing to impose a tax on property “speculation” to address the dire shortage of rental housing. While few are complaining about the two per cent surcharge set for 2019 on foreign nationals and “satellite families” who leave second properties vacant, some have hammered the 0.5 surcharge on B.C. residents who maintain empty properties in Metro Vancouver, Victoria or Kelowna.
Eby is “a little frustrated” by misperceptions about how the tax affects residents of B.C. It’s aimed, he said, at “people who live in British Columbia who don’t pay taxes here; who earn their income somewhere else and use all the social services and buy property with money that’s not earned here, so they’re not paying taxes on it.”
The government’s bulletin on the speculation tax centres on “satellite families,” in which the family breadwinner makes money offshore but uses that wealth to buy B.C. properties using the name of a wife, child or lawyer who is a Canadian citizen or permanent resident.
Few recognize the speculation tax on B.C. residents is basically offset for those who pay income taxes in B.C. The Finance Ministry maintains the speculation tax will apply to fewer than one per cent of British Columbians, in part since those who pay taxes in B.C. get an automatic $2,000 exemption. “If you’re paying income taxes in B.C.,” Eby said, “you might be totally exempt. A Vancouver person owning a Kelowna property might be totally exempt.”
A related big problem that the government is tackling is the way people who don’t pay income taxes in B.C. can hide their true identities when buying properties here.
Eby’s early contribution to the housing debate was to provide Transparency International with data on the owners of the 100 most expensive properties in Vancouver. “They found,” he said, “that with 46 per cent of them, they couldn’t figure out who the actual owner was, because the (listed) owner was a student or a housewife or a numbered company or a bare trust or whatever.”
The B.C. government is bringing in two major measures to address this problem, which has allowed owners to avoid “huge amounts” of property transfer taxes, said Eby. First, James will shortly issue a discussion paper on a new registry that would require the true owners of a property to be declared. It would help, Eby said, with “tax enforcement” and “law enforcement.”
The government is also aiming to close the “bare-trust loophole,” which allows many to buy properties through trusts that make it possible to avoid the foreign-buyers tax, capital gains and the property transfer tax, the latter alone of which adds up to about $75,000 on a $3 million house. Asked to estimate the amount of lost taxes due to such trusts, Eby said some recent “massive deals, like the Bentall Centre downtown, one of the biggest property deals in B.C. history, was done this way. … It’s a huge amount of money.”
The goal for Eby is a reasonably equitable housing market. “To my mind the issue has always been the use of internationally earned money, which hasn’t been subject to (Canadian) taxes, like local people’s has, and the unfair advantage that brings,” he said.
“It’s less of a concern about citizenship. If you’re an American working here, paying all your taxes here, or a Chinese person working here, paying all your taxes here — and buying property, that to me is fine. But if you’ve got somebody who is earning money in a low-income-tax jurisdiction and a high-property-tax jurisdiction, bringing that income into a low-property-tax, high-income-tax jurisdiction (such as Canada), then it’s really unfair.”
These are just some highlights of the complex tax legislation the B.C. NDP is working on to return some sanity to housing costs, which have recently shown signs of falling. The details of responding effectively to rising trans-national wealth migration can cause some eyes to glaze over. But understanding these powerful forces is the way forward.
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