(OTTAWA) The Parliamentary Budget Officer says a new federal tax on vacant properties owned by foreigners may not bring in as much as the Liberals hope.
Posted at 12:24 p.m.
The Ministry of Finance estimates that the new 1% tax, which was due to come into effect at the start of the year, will bring in 200 million in the 2022-2023 financial year, which begins in April. Over five years, the government plans to release $700 million of this 1% tax on the value of homes owned by non-resident non-Canadians and deemed vacant or underutilized.
However, in a report on this tax measure, the office of the Parliamentary Budget Officer (PBO) predicts that the tax will not fill the coffers as much as the Liberal government had hoped.
His report estimates that the government will get 130 million from the measure in its first year, not 200 million. Over five years, Ottawa would draw a total of 600 million and not 700 million.
The report from Yves Giroux’s office, however, highlights some sources of uncertainty in its estimate, including “the uneven scope and quality of available data” on this foreign ownership, which could overestimate or underestimate tax revenues. expected.
The report also highlights potential behavioral changes for homeowners, who could adjust the use of their homes to avoid paying the tax. The law provides for several exemptions, in particular if the building is the habitual residence of the owner, his de facto spouse or his children. Recreational or vacation properties are also exempt from the tax.
PBO’s modeling draws in part on the experience of British Columbia, which in 2016 imposed a 15% tax on foreign buyers in Metro Vancouver. This tax has since been raised to 20% and is being extended to other communities in the province.
This tax has had a short-term cooling effect on markets, but prices have risen stratospherically since 2019. The latest figures from the Canadian Real Estate Association in the Vancouver market show that the average price in December 2021 was 1.23 million, a 17.3% increase from December 2020 — an average price of just over 1 million.
The Liberals have made some adjustments to the original plan to tax foreign-owned vacant homes, such as offering an exemption for vacation properties owned by non-Canadians — like those Americans who come to British Columbia during the summer.
The government’s economic update in December estimated the exemptions would cut tax revenue by $30 million in the coming fiscal year and then $25 million in each of the following four years.