A Wednesday forum organized by the Urban Development Institute in Vancouver is dealing with foreign ownership in the local housing market. and there’s new concern about offshore buyers avoiding Canadian tax.
Globe and Mail reporter Kathy Tomlinson investigated one case of a private equity manager in Beijing buying a $2.3 dollar home, but reporting to the Canada Revenue Agency in a divorce case his income was just $19,000 dollars a year.
At the same time, he wired almost $2-million dollars to his wife and son, who lived in the home.
Speaking with CKNW’s Jon McComb, Tomlinson highlighted a distinct pattern of foreign investors buying homes in the name of their wife or child, who make little to no income.
“In one-third of those 250 properties we looked at, we found that the property itself was registered in the name of those family members or corporations.”
Since the wives and children have virtually no income, they pay little to no income tax, nor capital gains tax.
Multitudes of tax loopholes exposed
In the Dunbar area of Vancouver one in four of what Stats Can calls couple-families, declared income of less than $35,000 in 2013, which puts them in the lowest tax bracket.
Thirteen percent of those couples, says Tomlinson, are claiming under $20,000 income, which is considered low income, or what used to be called the poverty rate.
“Essentially it’s a double whammy, you’ve got an erosion of family housing where local people who do pay taxes, and who are residents here, can’t afford to buy these houses. Yet the people who are buying them aren’t paying the taxes that support the roads and hospitals and all those things. We’re talking about both the provincial tax base and federal taxes.”
Tomlinson says there are many loopholes that have been exposed.
“On the provincial tax level, when houses are put in corporate names and then sold, the corporation can simply transfer or sell the shares to the new owner. In that situation there’s not change of ownership registered. The house stays in the same name, therefore there’s no provincial property tax paid. Which is huge; on a two million dollar home that’s $40,000 missing from the tax base.”
Tax lawyers say most of those wealthy foreign buyers aren’t technically breaking the law, but are simply using tax avoidance loopholes in the system, which is not illegal.