Time to Press the Pause Button on BC's Proposed Speculation Tax

In its 2018 Budget Presentation, the BC Government introduced a proposed new tax entitled “A Speculation Tax” as one measure among many aimed at addressing the housing crisis in BC. While previous policy efforts in this area have targeted Greater Vancouver, this new Speculation Tax is now proposed to apply to a number of communities and regions outside the lower mainland and it has sent shock waves across many BC communities.

Business and community leaders across the Central Okanagan, Nanaimo Regional District and elsewhere have raised concerns over the potential unintended consequences of imposing such a tax on those who do not currently pay income tax in the Province of BC but do contribute to local economies through investment and the purchase of a wide range of goods and services.

These leaders are asking the government to step back from implementing the “Speculation Tax” until the mechanics of how it would be implemented, to whom it will be applied, and how the tax is expected to make housing more attainable in our cities, is better defined and understood.

Since the proposed tax was first announced, chambers, development organizations, local government leaders, homebuilders and local economic development officials have been inundated with calls, letters and emails from business leaders in the Okanagan and elsewhere in British Columbia who are extremely concerned about the direct and indirect economic impacts of this proposed tax. There is also plenty of fear that the tax may be expanded to include other communities in BC.

At the same time, they are equally concerned about the total lack of consultation on this proposed tax. Developers have customers who are canceling contracts and/or looking to re-evaluate intended or already committed investments.

The upshot is lower economic activity, less employment, and ironically, less supply in the housing market. The development community cannot fathom how the proposed speculation tax will increase affordable/accessible housing in the Okanagan and in fact, they predict it may result in just the opposite.

Further, pre-seniors in Alberta and elsewhere who were in the midst of transitioning or planning to transition to the Island and the Okanagan as part of their retirement plans, now fear they will face unexpected and substantial taxes. This is “taxation without representation” which makes this a truly anti-Canadian tariff.

The uncertainty around this proposed tax is already forcing many to rethink their retirement plans. Surely taking money out of the hands of seniors and future full-time BC residents isn’t the intent of the proposed tax?

The mere mention of this proposed tax has already damaged BC’s brand in Alberta and that is of concern to many of our members who rely on our neighbours to the east to drive our tourism economy.

Given the modest number of property holders moving from Alberta, Saskatchewan and Ontario compared to a much larger number from the lower mainland, our Chamber suggests it is those moving from elsewhere in BC who are having far more influence on rising house prices in the Central Okanagan than foreign buyers or those who hail from another part of Canada.

If the government is truly trying to go after speculators who are negatively influencing the housing market, we suggest an excise tax at the time when the property is sold – if it is “flipped” within a specific time period – as that approach would be more direct and transparent.

And, it’s key to remember that accessible housing means there is housing stock: small developers who purchase a run-down property, put sweat equity and cash into it, then “flip it”, i.e., sell it into the market as a completely upgraded house so that they have the cash flow to go on to buy and improve another house – each process taking about a year or more – should not be penalized. They, too, are assisting the pool of safe, modern housing to expand. Very few get rich in the process.

A growing number of business organizations and local governments are banding together and calling on the BC Government to at least postpone implementation of the proposed speculation tax until 2019, when there is better data to show that the new tax will actually achieve its desired outcome of making housing more affordable.

If the government does push ahead with this tax, our Chamber asks that exemptions are issued for the Regional District of Nanaimo, the City of Kelowna and the City of West Kelowna, removing these targets from tax areas.

The government has already exempted Whistler, where in fact there is greater influence from “outside” speculators affecting housing availability. The same rationale for not including Whistler applies to West Kelowna and Kelowna and many north and mid Island communities.

And speaking of tax concerns, the Kelowna Chamber is also hearing from our small business owners who are equally concerned about the government’s new payroll tax. Our chamber supports the position and work of the BC Chamber which believes the government should have at least waited for the completion of the work of the MSP Task Force that was engaging with business as to how best to manage the transition from MSP payments to some sort of a payroll tax.

Most Chambers understand that the MSP was a regressive, outdated and cumbersome tax but do not believe the introduction of this tax in its current form is the best path forward. One of the things our members would like to see adjusted is the threshold of $500,000 for EHT exemption. They believe this is too low and should be bumped up. Manitoba’s threshold for example is $1.25 million.

Aside from dealing with tax policy changes provincially and federally the Kelowna Chamber continues to do its work in helping our members grow and prosper. That hard work continues to result in more small businesses joining our organization. Particularly, we wish to welcome new members since my last column: Synergy Gymnastics Centre; CareRX; Linttell Projects Inc; Cork and Tap Home Bar Outfitters; Parke Pacific Projects Ltd; Wildfire SEO and Internet Marketing; Optimiiize Nutrition Fitness Health; Karis Support Society; Helix Integrative Health; Technical Safety BC; Valley Garage Doors; Organize My Space; Everlasting Home Renos Ltd., KidSport Kelowna; Rena Saini Active Care Health; Dhillon Notary Public; Accent Homes; GSG Enterprises Ltd.; Drs J & R Vorster Medical Prof. Corp; Institute of Corporate Directors; Intact Insurance; Dennison Contracting; Should I Stay or Should I Go?; Odonit Branding; Dutch Media; Experience Wine Tours; Xcel Advisory Group; Ascentus Consulting; Okanagan Smiles; Duford and Company.

Dan Rogers is Executive Director at the Kelowna Chamber of Commerce.