University of British Columbia professor and economist Tom Davidoff says the province's decision to exempt work permit holders from its foreign buyers tax is a good move, as long as the government pays attention to loopholes around the tax.

Introduced in August 2016, B.C.'s foreign buyers tax applied an extra 15 per cent property transfer tax on real estate in Metro Vancouver, purchased by buyers who are not Canadian citizens or permanent residents, as a measure to cool Vancouver's hot real estate market.

Critics said the tax unfairly targeted immigrants who were working here and paying taxes. A group of foreign buyers even launched a class action lawsuit against the provincial government.

On Sunday, Premier Christy Clark announced the province would lift the foreign owners tax on people who have work permits but did not elaborate on the proposed changes.

Original tax too broad

Davidoff told CBC's The Early Edition although the tax attempted to address a real problem, it was too broad.

"About 50 economists wrote to the province long before this tax came into place and said if you're not paying income tax here and you're not a landlord and you're not a long time resident, then you ought to pay extra tax because it's killing the market," he explained.

"They went with 'does your passport say you're foreign?' which is very easy to delineate but then taxes people who shouldn't be taxed."

He said the new fix is "mostly sensible" as long as the government pays attention to potential loopholes — like what type of work permit someone has.

"Suppose you have a student here who can easily get a work permit for a $10/hour job after they graduate college or university and that student buys a $30 million house and pays $500 in income tax.

"I don't think that student ought to be fully exempt because they're actually using family money to buy a house and nothing to do with the income they're earning here," he said. 

"[However] conventional work permits are hard to get ... and if they're careful about that, this fix is the right thing to do."

Timing 'opportunistic'

Davidoff said the timing of the tax announcement did seem opportunistic but ultimately it was a good move.

"My sense is that they had probably been getting complaints ... [and] probably wanted to make the change, but I think on the weekend when Trump was blowing up on the xenophobic Muslim ban, it was probably good timing."

He said the new tax exemption could present a real opportunity for Vancouver, particularly its tech industry.

"We've got an opportunity here in Vancouver to become a real tech hub, to become a real intellectual, vibrant healthy economy," he said. "Being tolerant and open to diversity and an international workforce is a good step in that direction."

With files from The Early Edition


To listen to the interview, click on the link labelled UBC's Tom Davidoff on relaxed foreign buyer's tax rules