A federal crackdown on tax cheats in Vancouver’s sizzling housing market — which is acting like a flame to speculators, real estate predators and foreign cash flow — has critics calling on B.C. to demand Ottawa do more to help combat the “out-of-control” real estate market.
“It’s not clearcut to say that everybody involved in this is breaking the law or evading taxes. They may not be.”– David Eby, NDP MLA
A Chinese daily newspaper reported that a CRA employee leaked a slideshow outlining a planned crackdown on high-end homeowners with minimal incomes with a promise of 50 extra income auditors, plus 35 other staff on the B.C. real estate project.
In an email to CBC the CRA confirmed that it is focusing on B.C,’s real estate sector, and has conducted 339 audits and recovered more than $14 million in 2015-16. CRA does not look at the source of funds for purchases.
“These audits focused on the areas where the risk of non-compliance was highest, mainly related to property flips and GST/HST non-compliance,” the agency said.
A map based on census data shows households in 2005-06 with extremely low incomes, that do not even cover shelter costs. Many are in expensive neighbourhoods. (MountainMath)
“The real estate project was not undertaken to address questions of housing affordability. The CRA does not have any role to play concerning the affordability of real estate …Transactions in the Greater Toronto Area have been the subject of greater scrutiny for a number of years. More recently, the CRA has been actively monitoring and auditing real estate transactions in British Columbia.”
Vancouver’s red-hot housing market is attracting the attention of CRA, which has planned a crackdown on tax cheats. (CBC)
Vancouver tax lawyer Jeff Glasner says it’s not surprising that CRA is targeting B.C. given the hot market. He predicts the audits focus on looking at how long the property has been owned, how often the owner buys and sells to try to determine if the property was meant to be flipped or kept and falls under the principal residence exemption.
“This is an area that’s coming up more and more often,” said Glasner.
“As the saying goes — follow the money.”
‘Frankly a joke’
“Revenue Canada adding only 50 auditors to deal with this issue? This is an issue of literally thousands of households in Metro Vancouver, 50 auditors is frankly a joke,” said NDP housing critic David Eby.
“Where is the enforcement?”
He is calling on the province to “pound doors” in Ottawa to get more help and let academics mine recent real estate data and correlate it with tax information to gauge the extent of an odd phenomenon in Vancouver where people with below-poverty incomes own multi-million dollar homes.
Eby says going hard on this issue is crucial unless Canada wants to end up like other nations that let taxes slide.
“It sends an important message about tax law enforcement. That there is no free ride here and that’s a really important message because you see what happens in economies where people stop paying taxes. It looks like Greece where the economy literally collapses and the government can’t raise the money they need to function.”
Close to 70 per cent of Canadians own their own home, an even higher rate than in the U.S., thanks in part to mortgage insurance provided by the federal Canada Mortgage and Housing Corp. But some economists are starting to question whether this is sound policy. (iStock)
An analysis of census data turned up more than 24,000 households where low income was reported despite high property values, after weeding out all properties with renters.
Eby believes this phenomenon point to tax evasion, people who are hiding income and living tax-free in Canada.
He’s long called for a provincial task force to weed out Canada’s freeloaders.
But he’s quick to admit, “It’s not clear cut to say that everybody involved in this is breaking the law or evading taxes. They may not be,” said Eby, MLA for Vancouver-Point Grey.
A tax for the legal tax dodgers
It is legal in Canada to live in the country for less than 183 days (approximately six months) in a tax year, and not pay tax depending on other factors, including “significant residential ties,” which includes having a home, spouse, partner or dependants in Canada.
So Eby and others propose a special tax for non-taxpayers who buy high-value B.C. property that he describes as a solution to the federal tax loophole.
Eby says data analyzed from 2006 and 2011 census showed an inordinate number of lower mainland households with low income, but high value properties, which is not typical in other parts of B.C. or Canada.
More than 24,000 homes found in data
Jens von Bergmann at MountainMath Reports presented data at Eby’s press conference showing hotspots where people’s incomes seemed at odds with their housing costs, but clarifying that this research is based on dated census data and does not answer questions about why this is happening, where the money is coming from or how it may be affecting the real estate market.
“[The B.C. Liberals] should be pressuring the federal government like crazy. They should be pounding on the doors at Ottawa saying: Why are you not hiring enough auditors to chase this kind of activity in Metro Vancouver?” said NDP MLA David Eby. (CBC)
In von Bergmann’s report a map shows the expensive West Side of Vancouver has high rates of households with poverty-level income.
The analysis found 6,800 such City of Vancouver households and 24,380 in the larger Metro Vancouver area.
“One sees that in all of these measures Vancouver does stand out,” said Von Bergmann, who was introduced as a non-partisan scientist.
