B.C. Government Hikes Foreign Buyers' Tax and Promises to Tighten â€˜Loopholes'
by Yvonne von Jena | February 21, 2018
The provincial government in British Columbia unveiled its 2018 budget, announcing that the 15% tax on foreign buyers will increase to 20% and will be expanded beyond Metro Vancouver. It also will bring in new, concrete measures to "close the loopholes" that allow private lenders connected to launder money.
In addition to increasing the tax on foreign buyers from 15% to 20%, it will also be expanded beyond Metro Vancouver to include much of southern Vancouver Island, the central Okanagan and the Fraser Valley, according to BNN.
The speculation tax will take effect later this year, targeting foreign and domestic buyers who do not pay BC income tax in Metro Vancouver, the Fraser Valley, the Victoria area, Nanaimo Regional District, Kelowna and West Kelowna.
This is accompanied by higher taxes on foreign homebuyers and plans to create 114,000 affordable housing units over the next decade. Finance Minister Carole James said the tax measures are part of the government's aim to improve housing affordability.
The amount collected by the province in taxes is rising in the budget and it is forecasted to continue for the next two years, jumping from $28.2 billion in the last fiscal year to $35.1 billion in 2020-21.
Some are saying that a supply-side response is missing. For example, Jock Finlayson, vice-president of the B.C. Business Council, criticized the B.C. government for focusing more on relaxing demand pressures than offering more immediate help to municipalities and developers to increase supply. "If you're worried about pricing and affordability there is a supply side to the market to look at," he said. "It's not all about demand. That's kind of missing."
B.C.'s housing crisis was a major issue in last year's provincial election that saw the New Democrats form a minority government with the backing of the three-member Green caucus, ending the Liberals' grip on power after 16 years in what was largely seen as a rebuke of its tight-fisted fiscal management that neglected spending on social programs.
The B.C. government is also under pressure from an investigation by the Globe and Mail into money laundering in B.C. real estate. As a result, B.C.'s top lawmaker, Attorney-General David Eby, is saying that the province will bring in new, concrete measures to "close the loopholes" that allow lenders connected to the fentanyl trade to launder money by granting large cash loans and mortgages to Vancouver-area property owners.
The pledge comes as a result of the reporting that revealed how 17 local residents, most associated with drug trafficking, are effectively parking millions of dollars in Vancouver-area real estate. Those private lenders issue mortgages and short-term loans, just as banks do, except in cash, likely derived from drug trafficking and other crimes. Three of the lenders were caught carrying more than $600,000 in fentanyl-laced cash in 2016. They have collectively registered more than $20-million in mortgages and other debts against multimillion-dollar homes in recent years.
B.C. has been the target of other investigations by the Globe and Mail, including shadow flipping which involves the assignment of contracts and the immediate resale of residential real estate for a higher price without the seller's knowledge. This also resulted in added legislation in the province. It looks like it’s not letting up or likely to let up in the near future.