'A substantial revenue source': But B.C.'s property transfer tax barely mentioned in campaign
Neither the NDP or Liberals are proposing changes to tax, which raised more than $2 billion last year
There are plenty of taxes and policies that are being hotly debated on the campaign, but the property transfer tax isn't one of them.
Neither the NDP or B.C. Liberals mention changes to the tax in their respective platforms. But as real estate prices and homes sales have soared, so too has the importance of the tax to British Columbia's bottom line.
"It is somewhat of a substantial revenue source for the government," said Bryan Yu, deputy chief economist at Central 1 Credit Union.
Any change to the tax, Yu noted, would have an "impact on budgetary revenues going forward."
What is the tax?
The property transfer tax (PTT) was introduced by former Social Credit premier Bill Vander Zalm in 1987, when the average price of a Vancouver home was about $150,000, in order to tax speculation on high-end properties.
It is levied anytime changes are made to a property's title, beginning at a rate of one per cent for the first $200,000 of a property, two per cent on the fair market value between $200,000 and $2M, and three per cent on the portion greater than $2M.
In 2015, B.C. Liberal leader Christy Clark mused about reducing the PTT, but since then revenues from the tax have climbed by more than $1 billion.
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In their February budget, the Liberals forecasted $500 million less from the PTT for this fiscal year. Yu said because revenues from the tax are so dependent on housing starts, it's best for the government to be conservative in how much they expect each year.
"[Their forecast] is more of a drop than we have in our forecast, but housing markets can drop off more rapidly in terms of overall construction, so erring on the side of caution isn't bad," he said.
How parties feel about tax
The Green Party, for its part, is proposing a change to the PTT, which would increase the maximum rate from three per cent to 12 per cent for properties valued at more than $3 million, and eliminate the one per cent rate for the first $200,000 of a property's value.
Both the NDP and Liberals have made several promises on housing policy, but none that would change the mechanism of the tax itself.
"We've recently made some changes to support home buyers," said the B.C. Liberals in a statement. "We increased the threshold to qualify for a PTT exemption for first-time buyers from $475,000 to $500,000. At the same time, we increased the rate on the amount of home sales over $2 million.
Revenue from the PTT has not traditionally been earmarked for a specific purpose, the Liberal statement said. Rather, it goes into general revenue and is used to fund government operations – healthcare, education and other social services.
David Eby, who served as the NDP's housing critic in the last legislative session, said "there's a good argument" money from the PTT should go directly to affordable housing. Eby argued the government delayed making changes to policy because of the windfall it received.
"The key is cracking down on some of the speculation that led to so much money from the PTT," he said, citing the party's promise to implement a two per cent speculation tax on properties owned by people who don't pay taxes in Canada.
"There may be a [fiscal] consequence as a result of it, but that's a risk we need not make, because clearly what's happening in the housing market is not sustainable."
With files from Richard Zussman