B.C.’s Housing Minister says the Canada Revenue Agency’s internal 1996 audit – which uncovered wealthy immigrant homebuyers in and around Vancouver not declaring their income from abroad – is just one of many instances where successive federal governments failed to properly regulate the real estate market.
In an interview on Thursday with The Globe and Mail, David Eby said that the CRA study from 25 years ago is still relevant today and the agency needs to dedicate more resources to taxing foreign capital in Canada’s real estate markets, which will make buying a home more equitable.
“When you have people earning local incomes, paying significant taxes on those incomes, competing with people who are coming from low-tax jurisdictions and who are not declaring those incomes to Revenue Canada, and not paying taxes, it’s an unfair contest,” Mr. Eby said.
“Our tax system is a self-reporting system, it relies on people reporting their income and being honest and disclosing their assets and I don’t know why average working Canadians from all backgrounds wouldn’t say ‘why should I be honest … if the federal government knows that people are playing the system in this way?’ ”
The 1996 audit focused on 328 higher-end sales in the Vancouver suburbs of Burnaby and Coquitlam, but the study also analyzed a random sample of 6,060 sales from Vancouver and neighbouring Richmond and discovered “similar demographic results.”
Of the 46 houses bought in Burnaby, staff found 72 per cent were purchased by new arrivals to Vancouver who reported an average total family income of just $16,000. In contrast, the CRA’s chart from the audit showed four buyers who were long-term residents reported average family incomes that were tens of thousands of dollars higher.
Housing experts said the study suggested that the typical wealthy foreign family buying Vancouver-area real estate pays little or no income tax while pricing these homes out of the reach of many locals whose taxes pay for public services.
Mr. Eby said he does not believe the 1996 report was intentionally buried by the federal Liberal government of the day, just given to a bureaucrat whom had five other competing priorities and allowed it to sit there gathering dust.
“Before I spent some time in government, I would definitely attribute this to malice and a coverup,” he said.
What is distressing, Mr. Eby said, is that the federal agency fought a journalist for five years to stop the release of the document.
A spokesperson for the CRA said Thursday that it could take a few days to respond to The Globe’s request for comment on Mr. Eby’s remarks. Last week, the agency apologized for the protracted battle to keep the document secret from the South China Morning Post’s Vancouver correspondent Ian Young, who first requested the information in 2016 after a whistleblower leaked him details of the study.
The CRA has said the audit intentionally focused on cases where the buyer may have been underreporting their income and, thus, “was not intended to, and should not be, extrapolated to the whole population.”
The federal agency also said it takes cheating its system seriously and, in recent years, has stepped up audits in the hot housing markets of Toronto and Vancouver while closely monitoring the increase in sales in and around Montreal.
Mr. Eby said the agency needs to enforce existing laws by harnessing the tools his government has created. These include homebuyers’ declaration of their country of residence for tax purposes as well as the registry for beneficial owners – which will come into full force at the end of this year to make it tougher for people to hide real estate investments behind corporations, trusts or partnerships.
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