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PRESSING THE PAUSE BUTTON ON BC’S SPECULATION TAX (2021)

2021
Finance & Taxation

The tax is unfair, poorly thought out, has not achieved the dollar value predicted (just under $88 million collected in 2019 – 2020 according to government news releases). The tax encourages buyers to move out of areas such as Kelowna and West Kelowna to purchase property, while they continue to use the amenities and infrastructure of these communities without paying any local taxes.

Additionally, in-migration – from the coast, from other provinces, from abroad – is discouraged, even by those nearing retirement age who had purchased a second property with an eye toward not only vacationing and spending vacation dollars here prior to retirement, but also moving here permanently within several years.

 

Background

In 2018, a ‘Scrap the Spec Tax’ policy was adopted1 by the BC Chamber delegates. At that point, it was a proposed tax. It is now entrenched in legislation, and for the subsequent two years, two additional policies2,3called for the tax to be abolished, to be made fair, and the numbers made transparent.

Currently, there is no change forecasted on the horizon by the provincial government. This is an unacceptable situation for all residents of BC.

The speculation tax was defined as a means for “enabling affordable housing in the communities in which it was imposed.” This has not happened, and in fact, the taxes collected, by community, have not been made public.

The tax remains unfair, and not only punishes the communities in which it is imposed, including in the Okanagan, Kelowna and West Kelowna, but also encourages residential sprawl to neighbouring, non-Spec- tax collecting communities, such as Lake Country, Peachland, and Vernon.

Additionally, it punishes residents across Canada who plan to retire or move to BC to one of the Spec Tax communities. At a time when Canada is actively encouraging in-migration globally, BC has effectively shut the doors of many of its communities to global residents who may prudently wish to buy property in ‘spec tax’ communities with an eye toward permanent residency.

The BC Government stated on January 11, 20214 that region-specific details of the 2019 tax declarations have been forwarded to mayors of communities where the measure applies, to help them work with the ministry on any changes. Repeated requests for this information from Chambers have met with no information to date.

The speculation tax, in place since 2018, covers most residential properties in the Metro Vancouver and Capital regional districts, the districts of Mission and Lantzville and the cities of Abbotsford, Chilliwack, Kelowna, West Kelowna and Nanaimo. While the government repeats its message frequently that only a fraction of owners must pay – and the Finance Ministry says 92 per cent of the $88 million raised in 2019 was collected from foreign owners – this remains an anti-Canadian tariff. Canadians from outside BC, other non-BC resident owners or so-called satellite families who make most of their income from outside Canada are included in the 92%.

 

THE CHAMBER RECOMMENDS

That the Provincial Government:

  1. Remove the listing of specific cities as targets of the tax and instead establish clear criteria within the regulations that would indicate what the threshold is (i.e. a rental vacancy rate of less than 2%) when the tax would be activated and conversely when it would be removed if the threshold is not reached (i.e. when rental vacancy rates are 2% or above).
  2. Establish transparent public reporting on revenue generated from the speculation tax within each jurisdiction it is being applied and reconcile in a public report the revenue being re- invested in the applicable community to ensure the goal of investing all funds raised in a jurisdiction within the same jurisdiction to an amount that is incrementally above the amount of public investment that would normally be made by BC Housing.
  3. Initiate a third-party review of the speculation tax to determine if it has achieved the desired outcome of creating more affordable rental housing in the communities where it is being applied.
  4. Amend the Community Charter to provide local governments with the authority to impose a vacant home tax with all revenue required to go into a community trust to be used for investments in non-market housing, or supportive housing.
  5. Engage in discussions with the UBCM, the BC Chamber of Commerce and the development community prior to making any further changes to the provincial speculation tax or authority of local government to impose such a tax.

 

    1 “Anti-Canadian Tariff – Pressing the Pause Button” page 51 https://bcchamber.org/wp-content/uploads/2020/06/2018-2019- Policy-Positions-Manual.pdf

    2 “Stop & Rewind” page 67 https://bcchamber.org/wp-content/uploads/2020/07/2019-2020-Policy-Positions-Manual-2.pdf 3 “Increasing Accountability, Transparency & Local Control of the Spec Tax” page 55 https://bcchamber.org/wp- content/uploads/2020/06/2020-2021-Policy-Positions-Manual-Final.pdf

    4https://vancouversun.com/news/local-news/speculation-tax-increased-long-term-rentals-in-b-c-raised-88-million-ministry