Tit for Tat- Affluent Alberta-Canadians face a B.C. tax increase

Originally published 12 March 2018
British Columbia’s new speculation tax will hit some affluent Albertans in their wallets

On 20 February, British Columbia’s Finance Minister Carol James introduced her first budget. A key policy issue for the NDP government was to address the housing affordability crisis. The tax will create a “new speculation tax on those distorting British Columbia’s housing market. The tax will target foreign and domestic speculators who don’t pay taxes here, including those who leave their units sitting vacant. This will include satellite families.” This measure is part of a 30 point plan to improve housing affordability in this province. The measure will be applied broadly “to ensure we don’t simply push speculators into neighbouring markets.” The tax will apply to Metro Vancouver, Fraser Valley, Capital (Victoria) and Nanaimo Regional districts and the municipalities of Kelowna and West Kelowna. Exemptions will be made for principal residences, qualifying long-term rental properties, and special cases.
The details of the new tax have not been made public but will affect a significant number of Albertans who hold “vacation” property in B.C. Many of these Albertans expect to retire to the western province in any event and this measure may encourage them to move sooner. The tax is expected to bring in $87 million in 2018-19 and $200 million in the following two fiscal years. In 2018, the rate will be $5 per $1,000 of assessed value and in 2019 will increase to $20 per $1,000 in assessed value. The tax will be administered by the provincial government outside the normal municipal assessment system. Notices will be sent to all property taxpayers in those areas. The notices will request social insurance number; household information; information on worldwide income; information relating to upfront exemptions and other information identified by the Ministry of Finance “as useful for audit and enforcement purposes.” “Relevant information collected as part of the additional tax” will be made available to the Canada Revenue Agency.
For Albertans owning a B.C. recreational property subject to the tax with an assessed value of $500,000 in 2019, additional taxes will be $10,000. Assuming 10,000 Alberta families are affected, this number adds up to about $100 million going from Alberta residents to the B.C. treasury.
This measure unfortunately speaks to the continued balkanization of the Canadian economy. Previously, it was “evil” foreigners (mainly Chinese) that were inflating real estate prices. Now speculators from out of province have joined the evil foreign speculators. While not targeted at Albertans, the tax is a convenient way of “fixing” a speculative housing bubble, while also taking money out of the pockets of affluent Albertans. So much for encouraging the mobility of both capital and people in Canada.