Tuesday, October 16, 2018

B.C. government tables legislation on speculation tax

B.C.'s finance minister has introduced legislation to enable the government's contentious speculation tax

VICTORIA – B.C.’s finance minister is charging ahead with the NDP government’s speculation tax, while dismissing calls from local mayors for exemptions.
Carole James introduced enabling legislation on the tax Tuesday, though it did not appear to contain any major changes municipal governments had called for.
James said that while she’s heard the concerns of mayors that the tax might deter local development projects, the speculation tax remains a critical part of her government’s plan to improve housing affordability by levelling surcharges on owners of multiple properties who leave them vacant.
“I have met with almost all the mayors in the impacted areas… I have had a chance to listen at UBCM to the debate,” said James.
“But when the province is facing a crisis and the people for British Columbians is facing a crisis and the economy is facing a crisis because of the lack of the affordable housing, it is the responsibility of the provincial government to act.”
Local politicians have called on government to abandon the idea, or at least create opt-outs for communities worried the tax will harm the economy and developments. The Union of B.C. Municipalities voted in September to ask for exemptions to the tax.
The tax will contain exemptions for special circumstances, including people facing medical emergencies who want to buy a second home closer to a medical facility, people undergoing a separation and those with disabilities.
Companies that are holding multiple properties for development or renovation will also be exempt from the tax if they can show they are moving forward on the construction project schedule “without undue delay,” according to the bill. That includes future phases of planned residential development properties.
The speculation tax levies a surcharge on second homes left vacant by owners, starting in 2019. James has said it will penalize owners who leave properties unused, thereby pressuring them to either sell or rent the property to someone else.
The tax will apply on people who own multiple properties in Metro Vancouver, the Capital Regional District (but excluding the Gulf Islands and the Strait of Juan de Fuca), Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission.
B.C. residents will pay a tax rate of 0.5 per cent on assessed value, Canadians from outside B.C. will pay 1 per cent, and non-Canadians will pay 2 per cent.
Owners are exempt from the tax if they rent their properties for at least six months of each year. And there’s also a tax credit for B.C. residents with second homes valued under $400,000.
Though the legislation was introduced Tuesday, the fate of the tax remains unclear.
The NDP government doesn’t have the votes in the legislature to pass the tax into law without the support of either the Greens or Liberals.
Opposition Liberal leader Andrew Wilkinson and Green leader Andrew Weaver both support adding an opt-out clause requested by mayors in communities like West Kelowna and Langford that feel the tax will harm their local economy. If the two opposition parties partner together, a Liberal-Green alliance of 45 votes could easily outvote 41 NDP MLAs to change the legislation.
Wilkinson used Tuesday’s question period to attack what he called a “phoney speculation tax.” The Liberals have also called it a jealousy or envy tax. Weaver has called it an inheritance tax.
The enabling legislation comes eight months after the tax was first announced in the February provincial budget. Since then, it has morphed in size and scope through a series of ministerial statements, press releases and government information bulletins.
The original intention of the speculation tax was described by James as a way to target foreign speculators who purchase property as an investment and leave it vacant, thereby harming both the real estate market and rental availability. She originally stated almost all British Columbians who pay income tax wouldn’t end up paying the tax.
However, James later revealed almost two-thirds of those who pay the new housing speculation tax will be British Columbians. About 20,000 of the 32,000 homes subject to the new tax will be owned by British Columbians and not foreigners or residents of other provinces, James revealed during a debate on her ministry’s spending plans in the legislature.
Of the $201 million the speculation tax is expected to generate annually for the province, $140 million is projected to come from foreign or out-of-province owners, and roughly $60 million from British Columbians, the ministry has estimated. That’s because B.C. residents will pay a rate of 0.5 per cent, compared to one per cent for Canadians from outside B.C. and two per cent for non-Canadians.

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