Part-time B.C. residents fear they may feel full sting of new ‘speculation’ tax

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Allan and Jocelyn Shipley have been dividing their time between a small Toronto condo and a home in Parksville on Vancouver Island since 2005. The island home is a gathering place for their son and grandchildren, and is filled with collectibles and family heirlooms.

For about five months of the year, the Shipleys do volunteer work in Parksville, sing in the local choir and take part in literary events. Toronto is where Mr. Shipley accesses medical care, including his cancer specialist, and to qualify for health coverage, Ontario is where the Shipleys file their income tax.

This puts the couple among 15,000 homeowners who are expected to pay British Columbia's new tax on vacant homes, which has been branded by the province as a speculation tax.

When Finance Minister Carole James announced the tax in her budget on Feb. 20, Mr. Shipley was startled to learn that it would apply to his Parksville home.

The tax – one of a number of new measures designed to cool the overheated real estate market – is supposed to target foreign and domestic speculators. It is expected to bring in $200-million a year to the treasury once fully implemented, but it is also intended to encourage owners of empty homes to put those properties into the long-term rental market to avoid the tax.

"It's a speculation tax, and we are not speculators," the 72-year-old retiree explained. "We've lived here for 12 years."

The new tax, which will apply to the 2018 taxation year, is remarkably undeveloped as far as budget measures are concerned.

Although a centrepiece of Ms. James's budget, thousands of homeowners will have to wait for the legislation in the fall to learn whether the provincial tax will apply to their properties, and if so, whether they will qualify for any exemption that will provide some kind of income tax rebate the next year.

The Finance Ministry, in a tax information sheet, states that residential properties in certain urban areas that are not owner-occupied or in a long-term rental pool will be taxed. The first tax bills will be sent out after the legislation is introduced.

However, given the many still-undefined factors, it is difficult to imagine how the revenue forecast was reached.

"Most" B.C. homeowners will not have to pay the tax, and "certain special cases" will be granted exemptions, the fact sheet states. Who gets an exemption? Wait for the legislation. Owners who qualify for an exemption will have to pay the tax and then wait until they file their income taxes in 2019 to see how much of it will be repaid. People can avoid the tax if they put the home into long-term rental, but the definition of which rentals will qualify is still being drafted.

The new tax will "initially" apply to residential properties in Metro Vancouver, the Fraser Valley, the regions of Victoria and Nanaimo on Vancouver Island – which includes communities such as Parksville and the Gulf Islands – and Kelowna in the province's interior. The phrasing suggests it will be broadened to other areas, but that is still up in the air.

The vagueness is unsettling for those who might have to pay a substantial new annual tax. In the Okanagan region, where more than 18 per cent of home buyers last year were from outside of B.C., the Kelowna Chamber of Commerce is questioning why its community has been targeted.

"We fail to see how slapping an additional tax on Albertans (or other Canadians) that own property in this province is somehow going to make housing more affordable for young families or those living on the streets," chamber president Tom Dyas said in a statement, adding that the absence of details is unhealthy for the economy.

Ms. James said in an interview that the tax policy was not rushed, even though the legislation will not come out until the fall. "It was ready for the budget," she said. But because it is an unprecedented tax, there is no way to model the outcome, so more work is needed.

"We want to make sure all of those details are in the legislation before we go public with the details."

Asked about the circumstances of the Shipleys – and people like them who have lived part-time in B.C. for years – Ms. James expressed sympathy but maintained the tax is fair.

"The principle is, if you have a place in British Columbia and you are benefiting from the services in British Columbia, you should pay your taxes in British Columbia," she said.

The term "speculation tax" does not seem to reflect Ms. James's intent.

"I certainly see it more as a fairness tax," she said. "We think it is fair for people to pay a little bit more for the services they benefit from, whether we are talking about roads or parks or the community itself."

For the Shipleys, "a little bit more" is a lot. When the tax is fully implemented at a rate of 2 per cent of the assessed value of the home, the fixed-income pensioners will face an annual bill of $9,400.

"We cannot afford it," Mr. Shipley said.

He has written to the Finance Minister to suggest an exemption for long-term part-time residents. He will have to wait some long months for an answer.