The day after her government launched an initiative to collect citizenship data on home buyers – in response to concerns about foreign ownership driving up real estate prices – the Premier said her province has had to fill the information gap “to help us come up with the right solutions” to the spiralling cost of home ownership, particularly in Metro Vancouver.
The gap in federal tracking was exposed in March in records showing that dozens of Vancouver-area real estate firms are failing to comply with federal anti-money-laundering laws that require them to identify who their clients are and where their money comes from.
The Financial Transactions and Reports Analysis Centre (FinTRAC), which enforces the legislation, said it found “significant” or “very significant” deficiencies within some five dozen B.C. brokerages in the past year. It decided to step up scrutiny over worries that money primarily from China is being laundered through Vancouver real estate.
“I think [FinTRAC] can up their game, I think they are trying to now,” Premier Clark told reporters Wednesday. “They would probably tell you they are not where they want to be right now but they have begun that process, so that’s great. We’re partnering with them to work more closely with them now so that sharing of information is going to make a real difference,” she said. “I think now, in Vancouver in particular, people are really seeing the need for that to be tightened up.”
Beginning in June, British Columbia will require real estate buyers to declare their citizenship when they file the new property transfer tax-return form. The form will also ask if the property has been purchased for a bare trust, and the citizenship of directors of such a trust must also be disclosed.
Finance Minister Mike de Jong predicts British Columbia will not run into the same problems as FinTRAC in compliance, describing his tax branch auditing system as robust. British Columbia has 18 auditors who are responsible for auditing the 190,000 property transfer tax forms received by the ministry each year. The penalties for providing incorrect information on a property transfer tax return can be up to two years in jail and fines of up to $25,000 for individuals.
He said British Columbia and the federal government are moving toward better sharing of data and promised that the B.C. findings will be shared with Revenue Canada. “The two levels of government collect data and I think the interests of Canadians and British Columbians are served by sharing that,” Mr. de Jong said in an interview.
“At the end of the day, what Canadians and British Columbians want to know is that whoever is engaged in a taxable activity in this country is paying their fair share.”
The Finance Minister has resisted calls for a tax on foreign ownership. He said British Columbia is going to collect data on citizenship to determine if there is any evidence that real estate sales to non-Canadians are driving up housing prices in Greater Vancouver, where the average price of a single-family detached house sold in March was $1.78-million.
“I tend to have a bias against singling out foreign investment for a separate or punitive tax,” Mr. de Jong said earlier this week when he announced the change. “We work awfully hard to attract people to come here, to invest here, to create jobs here. And when I look at other jurisdictions that have tried this, and the impact it has had on the affordability issue, it has been negligible. And in the meantime, it has sent a very negative signal.”
Vancouver Mayor Gregor Robertson said in a statement Wednesday that he does not want to wait until next year for British Columbia to evaluate its new data. “Vancouver is an international city and global capital is now clearly impacting our local housing market. Collecting citizenship data is a good first step, but we don’t need to wait for the data to take action,” he said. “Targeted taxes on luxury homes and speculation would go a long way to help level the playing field and bring some relief to residents facing an affordability crunch in Vancouver.”
BC NDP housing critic David Eby said the citizenship disclosure requirements will not help address what he called a crisis of affordability. “The problem is about behaviour, not citizenship,” he said. The opposition has proposed changes to the tax system designed to capture those who buy property for investment purposes but leave the home vacant, and for those who do not pay income tax in British Columbia.
“Asking someone to declare their nationality is just going to lead to the same problem that FinTRAC has found, which is poor documentation by realtors. We need a different mechanism.”