Trade lawyer alleges B.C. tax on foreign buyers of housing violates NAFTA

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      Once again, allegations are being made that Premier Christy Clark's government has run afoul of international trade law.

      This time, it's in connection with a new 15 percent tax on foreign buyers of Metro Vancouver real estate, which takes effect on Tuesday (August 2).

      It doesn't apply to domestic buyers.

      In an opinion piece in the Financial Post newspaper, Toronto trade lawyer Barry Appleton writes that this "discrimination is a glaring violation of our trade treaties" that could leave Canadian taxpayers on the hook for billions of dollars.

      Under chapter 11 of the North American Free Trade Agreement, international investors from the United States and Mexico must be treated on similar terms as domestic investors.

      Under the investor-state dispute-settlement mechanism, investors can file claims for compensation against national signatories if this provision isn't being respected.

      During the Harper era, Canada signed similar treaties extending these rights to investors in more than two dozen other countries.

      "While the vast majority of Vancouver’s foreign property buyers might be Chinese, who were apparently the provincial government’s main target, enough investors from our dozens of treaty partners, comprising of hundreds of affected foreigners with trade rights, could be caught up in this tax, leading to mass claims," Appleton wrote in the Financial Post.

      According to Appleton, there are explicit exemptions under NAFTA for real estate owned by nonresidents of Prince Edward Island and for real estate within a certain distance of the Mexican coast that's owned by non-citizens of Mexico.

      Appleton has written two books on NAFTA and his legal practice has focused almost exclusively in this area for more than two decades. He emphasized to the Straight that there is nothing in NAFTA providing an exemption for B.C.'s new tax on foreign buyers.

      Real estate isn't the only area of the economy that has generated a warning like this.

      Earlier this year, diplomats representing seven jurisdictions—the European Union, United States, Australia, New Zealand, Mexico, Argentina, and Chile—signed a letter objecting to a B.C. Liberal government liquor reform giving preferential treatment to B.C. wines in grocery stores.

      "Accordingly, we request that British Columbia amend the relevant regulations in order to ensure that the sale of wine in grocery stores is permitted on a non-discriminatory basis," the diplomats wrote.

      The B.C. Wine Institute, however, has maintained that the regulation allowing the sale of B.C. wines on grocery shelves was "grandfathered into trade agreements".