B.C. Property Transfer Tax. Fix it or scrap it!

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from: http://www.vancouversun.com/opinion/col ... story.html

""If Finance Minister Mike de Jong can’t fix property transfer tax, he should scrap it

When I wrote last spring about how bare trusts let rich property owners dodge tens of millions of dollars — maybe hundreds of millions — in B.C. property transfer taxes, Finance Minister Mike de Jong sent an email fretting vaguely about possible unintended consequences if he plugged this loophole.

So my thanks to reader Mike Sapic, a Surrey teacher and tenacious critic of policies that privilege big guys at the expense of the rest of us, for eliciting from the finance ministry a more specific excuse for doing nothing.

The issue is that an unknown, but large, number of commercial land titles in B.C. are held by legal entities known as bare trusts. Meanwhile, beneficial ownership — the right to use property, rent it, or sell it and enjoy the capital gains — is a separate legal construct. So when these properties change hands, both are sold — the bare trust for a token amount, and beneficial ownership for market value.

Because the bare trust still holds the title, there’s no property transfer tax. Moreover, this ability to dodge PTT is the only rationale I’ve ever heard for companies bothering to set up a bare trust.

Sapic has been hot on this issue since he wrote a letter to the editor in support of my column. This week, he forwarded me a reply he got from Heather Wood, assistant deputy minister in the ministry’s policy and legislation branch.

Wood, like de Jong in last spring’s email, acknowledges the problem.

She adds, “taxing transfers of the beneficial interest in property would require government to consider other situations in which the beneficial ownership of property can transfer between parties — for example, selling shares in a corporation that owns property will also change the beneficial ownership of property.”

This “would expand the tax significantly and make it considerably more complex.”

Then, echoing the minister’s words to me, “while it has not yet been determined that a remedy is required, it may be challenging to design a remedy that didn’t have other, unintentional consequences.”

Thus, if I understand correctly, they don’t want to close one loophole (bare trusts) that lets mega-bucks slip through their fingers because then they’d have to deal with another one (sale of shares).

The uncharitable might say the government takes this stance to look after its business buddies, but there’s also a kinder interpretation. If the government were to argue that putting this kind of tax on these kinds of transactions would be both unfair and detrimental to business growth in B.C., I think they’d be absolutely correct.

But — and this is a hugely important qualifier — these exact same concerns apply to the property transfer tax as it stands. Worse, the impact of this tax on ordinary buyers is made even worse by the government’s stubborn inaction. It leaves the little guys carrying the whole burden, rather than sharing it with big guys who dodge it.

This burden was bad enough when former premier Bill Vander Zalm introduced the tax in 1992, and it has grown relentlessly worse thanks to rising home prices.

It may be “only” one per cent on the first $200,000 of a property’s value and two per cent on the rest, but it adds $10,000 to $20,000 to the cost of even a modest home in Metro Vancouver. Banks don’t consider this cost to be part of the home price, so it’s not covered by a mortgage and thus eats sharply into buyers’ down payments.

And, because families typically change homes a few times over a lifetime, this impact compounds wickedly. A few years ago, Abbotsford realtor Dave Andrews credibly calculated that for every $1 revenue the tax nets the provincial treasury, citizens lose $2 in capital gains.

You’d think the sharper minds in de Jong’s ministry could find ways to end these perversities. But in case they still can’t think of anything after 31 years to mull it over, here’s one solution — a surefire way to make this travesty more fair and less harmful to the economy.

Scrap the tax. This will put all of us on the same footing as big guys with high-priced advisers. It will moderate B.C.’s worrisome cost of housing. It will help keep builders busy. It will make this a better place to live and to invest.""

[Relentless]

A residential property should only be subject to a one time transfer tax period.
All commercial properties should have transfer tax each and every time they are sold.
All residential homes over $1,000,000 should have transfer tax each time they are sold.

Save the poor and average wage earners and tax the rich who can afford it.

The BC Property Transfer tax is a multi-billion dollar industry created by someone who wanted to bring in more tax revenue then you could ever count!

[hobbyguy]

The property purchase tax has some benefits, most notably some discourage of speculative flipping.

But taxes must be even for all, so either plug the loophole or scrap the tax are the correct options. The status quo is not acceptable.

My guess is somebody will burble on about double taxation or some such feldergarb as they do about dividends. But we, the average citizens, get double taxed all the time (bought a used car or boat lately?). I'm tired of those who are most able to pay a fair portion of taxes dodging them.

[Rwede]

I still find it baffling that the guy who rammed the property transfer tax up our behinds was later hailed as a hero for his anti-HST propaganda campaign by so many on here who followed him blindly down the road to the return of another punitive tax, the PST.

You'd think people would have learned a lesson from the first hosing with the PTT. Apparently not.