British Columbia will introduce new measures to improve the collection of data around real estate transactions – information Finance Minister Mike de Jong says will then be shared with the Canada Revenue Agency.
“The vast majority of Canadians and British Columbians, I believe, will pay their taxes and understand the services that are dependent on that,” the minister said Monday. “They want to know that everyone else is abiding by the law as well and doing their part, and it’s our job to ensure that they are.”
The measures are to be announced Tuesday, when Mr. de Jong unveils the provincial budget. The Real Estate Council of B.C., which regulates licensed agents, and the Canada Revenue Agency did not immediately comment on Mr. de Jong’s plan. The council, in a broad statement, said recent media reports around the professional conduct of some licensees is a “matter of significant concern” and it will enforce regulations and standards to the fullest extent possible.
Mr. de Jong made his remarks the same day a continuing Globe and Mail investigation into Metro Vancouver’s skyrocketing real estate market found several recent sales in which brand new and seemingly vacant houses – some staged with furniture – were marketed to buyers as “owner-occupied” and, therefore, “no GST” required.
The Canada Revenue Agency has told The Globe it is auditing cases of possible GST evasion on new-house sales. It is also investigating cases of undeclared capital gains or income, many involving homeowners who evade taxes by declaring investment properties as principal residences. The sale of a principal residence is not subject to capital-gains taxation.
The Globe also found some agents were making dubious claims in their marketing materials and using brazen techniques to try to get people to sell their houses. One Richmond property owner said she woke up to a for-sale sign spiked into her front lawn. When she called the agent who left the sign, she was asked if she was interested in selling her residence.
The latest Globe story was published one week after the paper’s investigation into so-called shadow flipping prompted the province’s Superintendent of Real Estate and the Real Estate Council of B.C. to launch a review. Shadow flipping, or contract assigning, essentially involves arranging a sale and then finding a new buyer willing to pay more for a given property before the deal closes. Assigning contracts is legal, but controversial. Speculators who profit in this manner don’t pay property transfer taxes, because technically the property does not change hands until the deal closes.
Mr. de Jong said our system of taxation is rooted in the principle that people report information accurately, and when that doesn’t occur there is an enforcement mechanism in place.
“All of that needs to happen. To the degree that we can enhance enforcement process by governments sharing information that assists in enforcement, we should be exploring that,” he said.
Mr. de Jong said there are already some protocols in place to share tax-related information, but he vowed to step up the province’s efforts.
David Eby, an opposition NDP MLA and the province’s housing spokesperson, said “it’s not a surprise to me that taxes aren’t being paid following The Globe’s earlier work on this.”
“This whole market appears to be an entirely unregulated grey market without any apparent connection to the realities of tax obligations, of professional conduct, of duty to clients,” he said.
Mr. Eby said the “obvious solution” is to start enforcing rules that are already in place.
“We have a property transfer tax, that should be enforced. We have rules around GST on new homes, those should be enforced. We have rules around professional conduct for Realtors, those need to be enforced,” he said.
Aaron Jasper, an agent with Klein Group, Royal LePage and a former Vancouver park board commissioner, said hard-working and ethical real estate agents welcome the attention the industry is currently receiving. Mr. Jasper has said he would support harsher penalties for those who are found to have conducted themselves unprofessionally.
“It’s never a bad thing when this kind of conduct is exposed,” he said Monday.
Mr. Jasper said he had never even heard of some of the tactics mentioned in The Globe investigation, including the planting of a for-sale sign in front of a house that was not for sale.
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