The B.C. government should consider overhauling the tax system on foreign investment by bringing B.C. property tax in line with similar systems in Ontario and Quebec, say three researchers from Simon Fraser University, Monash University and the University of British Columbia.
A new report on what occurred to a Surrey woman after she purchased her home in 2003 and sold it in 2014, well after her home-ownership rights were vested, suggests that she lost out on a significant portion of the equity on her home – $270,000.
The researchers calculated that she would have generated more than $150,000 in additional equity had she sold her home and put the proceeds toward a more flexible product, such as a prefabricated modular home in 2016. That would have cut about 30 years off her projected homeownership period and increased her capital base from which to build a new home.
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David Eby, B.C. NDP finance minister, said that changes to foreign investment tax policy should be kept in the minister’s review to be released this spring.
But he also acknowledged that the report highlights a number of problems.
“The most concerning thing for me was, it suggests that I was a bad finance minister,” Mr. Eby said. “There were too many ducks in a row, that policy was not completely understood.”
The Financial Transactions and Reports Analysis Centre of Canada’s name – or IIROC – is used in B.C. to track foreign-investment data. “We have to be very careful and do the very heavy lifting, as we have a good fundamental track record with our fiscal policies and program spending that I think we can continue and build on,” Mr. Eby said.
For the B.C. Treasury Board as a whole, the report suggests a need for a stronger focus on administrative services and its functions, including clarifying, for example, the role of provincial rules to private self-regulation.
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The researchers, who have been collecting, analyzing and sharing data about the impact of foreign-investment taxation for more than a decade, say they received feedback from nearly 200 people, stakeholders and experts.
The data is contained in 167 B.C. surveys that offered detailed responses on policies and foreign investment. The reports serve as the “best available source of information on the interrelationships between investment, growth and real estate in Canada,” the researchers say.
The report highlights no great consistency across policy-setting jurisdictions: While Canada is broadly recognized as a dominant hub for foreign investment, some provinces, such as Quebec, have adopted complementary foreign-investment policies. In B.C., foreign investments are the subject of a temporary foreign-investment surtax but Ms. Doty’s case is the only known instance in which the tax results in a net loss.
The report lists recommendations for the B.C. government, with a focus on ensuring the process is as fair and transparent as possible, and includes recommendations for changes to taxation on investments.
Among the recommendations are the recommendations for B.C. to index its foreign-investment tax to the Canada Mortgage and Housing Corporation’s (CMHC) Home Price Index, which tracks a basket of foreign-investor markets, and to leverage CFRA, the research agency, to screen potential investments against CMHC data. The report also suggests that the foreign-investment tax should be targeted toward buy-and-hold, long-term investors.
B.C. said in its budget for fiscal year 2018-19, that of the $210-million estimated increase in revenue from a foreign-investment surtax, $21-million was earmarked for managing the influx of foreign investment.
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“We’ve been clear in the past, the more tax foreign investors pay, the more likely they are to invest in other sectors of the economy, and the more job opportunities they create,” Mr. Eby said.