Login / RegisterMaureen Bader: B.C. should eliminate property transfer tax, not undermine HST
Taxpayers in British Columbia are outraged about the harmonized sales tax, and rightly so. It will add a new tax to many items previously exempt from the provincial sales tax, such as restaurant meals and new homes. The HST does, however, have some theoretical benefits. It simplifies the tax system and makes the province a more competitive place for business investment.
Nevertheless, the surprise HST announcement was met by a business lobbying effort demanding relief from the tax. One group that got a break was the new-home building industry. While this may help a few new-home buyers, it undermines the tax simplification benefits of the HST and does little to improve B.C.’s competitiveness. In fact, the government could have bolstered the competitiveness of the province and helped all families struggling to purchase homes by eliminating the property transfer tax instead.
The property transfer tax hits all property sales. It has no economic benefit, taxes mobility, and is a job killer that discourages companies from locating in B.C. The PTT adds two percent to the property price, less $2,000. So, a family struggling to buy a $525,000 home would have to pay an additional $8,500 in PTT.
The PTT was brought in by the Vander Zalm government in 1988 and became such a fantastic cash cow that no government since has eliminated it. Yet, the B.C. government knows the PTT is a bad tax. A motion at the B.C. Liberal convention in 2006 moved that the government abolish the PTT. The resolution was passed with overwhelming support and is part of B.C. Liberal party policy.
But this is where party policy and government policy diverge.
This tax generated almost $1 billion in revenue each year over the past five years on the backs of families struggling to buy homes, searching for a better life in new locations, and on businesses trying to expand. It makes B.C. a less competitive place for business investment.
Not only that, the revenue brought in by the PTT makes the break on the HST for new-home buyers look like chump change.
Since it announced the HST, the government has said it wants to be sure some new-home buyers pay “no more” in tax on new homes than they would have paid before the HST. Then, to show it had been listening to complaints about the HST, the government raised the threshold for the HST rebate on new homes from $400,000 to $525,000, and the maximum rebate from $20,000 to $26,250. This move will only put about $80 million per year back into the pockets of homebuyers, far less than what eliminating the PTT would have.
So the question becomes, why would the government complicate the HST and pander to the building industry by giving them a break instead of just getting rid of the PTT? The government might say it was because it listens to its key support groups. However, the real reason is more likely because government is addicted to the revenue stream the PTT provides.
If the government were truly interested in making B.C. a competitive place for business investment and helping families buy homes, it would eliminate the PTT.
Maureen Bader is the B.C. director of the Canadian Taxpayers Federation.
Ms. Badar articulates the silliness of muddying waters with concessions to some sectors over the HST which will only confound the ugly political debate further---
then sets out support of the abandonment the property purchase tax--a revenue generator of one billion dollars.
I agree--with Ms. Badar and (apparently) with BC Liberal caucus decision of 2006. Property purchase tax on a non principle residence purchase--I would leave in place.
People purchasing a home, particularly couples, will always do alot of good consuming following a purchase--these folks are getting locked-in at least for awhile--into homeownership---to own a home in Vancouver--you need substantial income as it is---this income was taxed--there will be tax on all the items you purchase for your new home---.
I substantially agree with this--I would ask Ms. Badar if she has an analysis of the economic benefits of 'cutting' the property purchase tax?
BC depends on demand for home ownership--it not only drives large segments of the economy---it further dedicates most of these people to good citizenship.
We don't have bona fide privately properly ownership---the depth of this is not well known--and the home is often the largest asset in most estates.
It's tough enough making the decision to be a homeowner with the responsibilites which follow---we ought to remove these encumbrances from home ownership--so long as we keep a shorter leash on developers--with a higher standard for home construction than presently provided for in Canada. This will drive up prices some--potentially, however the anticipated increase in interest rates over the next six months AND the status quo with property purchase taxes ----HST--one can readily see how this could scare off alot of potential buyers of homes---it's just too much.
Your article is very interesting. We are in the process of purchasing a home on behalf of our daughter and son in law. They have been unable to sell their split level home and they require the home (we have purchased) as our son in law is very ill with ALS. We propose to sell them the small home when their home finally sells. We understand that the only way we can get around another PPT payment will be to have them live in the home for a minimum of 6 months before purchasing it. I can't believe it - IS THIS TRUE?! Is there anything we can do to simplify this transaction without this 6 month wait? Is there anything we can do to support your cause? It seems ridiculous that it's so expensive to help our family. Indeed, if the double sale occurs, with no tax relief, this $430,000 home will cost our family over $13,000 in PTT!! It's no wonder that Real Estate activity in the Lower Mainland is at an all time low. While the Government may look at historical PTT activity as attractive, the situation going forward is about as effective as steering a ship by watching its wake, to keep it in a straight line.
Penny and John Allan
pennyjohn@shaw.ca