Seniors advocates are worried that the new requirement for homeowners to register empty-home declarations is going to cause distress for infirm seniors and disabled people, and anyone else who might fall through the cracks and fail to notify government that they are exempt from the tax.
The Speculation and Vacancy Tax [SVT] is really the province’s version of the City of Vancouver’s Empty Homes Tax, and it applies to any home left vacant for at least six months. It is estimated the tax will apply to 32,000 homeowners, or about 1 per cent of B.C. residents, in specific areas. The tax rate is 0.5 per cent of the assessed value of the property, which is a substantial amount for a detached house in the Lower Mainland. Homeowners will receive their first SVT packages by the end of February, and will have until the end of March to make their declaration. If they don’t, they’ll receive a tax notice of assessment. Declarations will have to be made annually.
In order to be exempt from paying the tax, a homeowner has to go online and fill out a declaration. If both spouses are on title, each spouse has to complete the declaration. Isobel Mackenzie, the Seniors Advocate for B.C., says that could pose problems for an elderly spouse who is married to someone with dementia, and who does not have power of attorney. But if they live in Vancouver, they are also looking at the Empty Homes Tax declaration, which has a separate deadline. She has no doubt the new rules will overwhelm some people.
When she was interviewed by The Globe and Mail last week, Ms. Mackenzie said she plans to speak with the Ministry of Finance staff on these issues and others.
“I’m trying not to get sucked into the politics of it, or the validity of the tax – that is not my wheelhouse,” Ms. Mackenzie said. “What I want to address is, if you are a homeowner, you already have to be able to pay your property tax. And if you lived in Vancouver the last year, you have already had to exempt yourself from the city’s [new] vacancy tax. And of course, all of us have to file our income tax. How are we managing all these processes?”
She says it needs to be clarified if unpaid SVT gets rolled into property taxes, or if the tax bill will be kept separate. On Wednesday, the ministry clarified that those charged the tax will get a separate bill.
“The uniqueness here is that you are going to have a population of homeowners, and they have every appearance of being high-functioning people, but over time, their cognitive abilities have declined. …
“We want to make sure the person living in the home who is the homeowner and is entitled to that exemption doesn’t somehow get penalized.”
Some critics see the potential for confusion because of so many deadlines. The City of Vancouver property taxes are due Feb. 4, along with all Empty Homes Tax declarations. The provincial SVT declaration deadline is March 31. The City’s Empty Homes Tax payment deadline is mid-April. The deadline for the SVT payment for those who are not exempt is July 2.
Dr. Walter Ammann and his wife purchased a second home in White Rock for their retirement two years ago. They plan to downsize from their Burnaby home, which is their principal residence, and they currently use the White Rock condo part-time.
“We certainly do not want to rent the condo out,” Dr. Ammann says. “At this stage of our lives, we do not see ourselves as landlords.”
Therefore, the couple will have to pay the speculation tax for 2018 and 2019 and sell their house and move into the condo earlier than planned, he says. There is a tax credit of up to $2,000 per owner available to B.C. residents to offset their tax payable.
“It was not bought for speculation at all,” he says. “It was bought for our well-deserved enjoyment of the golden years, and to help transition into a much smaller home.
“It is sad to have worked very hard all of our lives and then the government comes along and essentially dictates what is best for the property we own, unless we pay up.”
He says he and his wife will have to fill out four declarations on their properties for the next two years.
But Dr. Ammann is opposed to the tax in general.
“The mortgage ‘stress test’ and the rising interest rates would have been more than enough to cool the market.”
He, too, is concerned about people who might not be aware that there is a need to declare their property’s status, and may be penalized for it.
“There are people living alone, in hospital or nursing homes, or they’re too sick at home to look after paperwork, or who have decreased mental capacity or they are not following news, or perhaps not savvy with computers, or living in remote areas or being away from the province for months – all good reasons for being unable to reply or missing the deadline.”
Residents who don’t make a declaration will be charged the tax and will have to pay a penalty and interest if not paid. However, there will be allowances. A Ministry of Finance spokesperson says the homeowner who is exempt can still make a declaration online, or by phone, after receiving a tax-assessment notice, without penalty. The province will refund people who pay the vacancy tax and later realize that they were exempt. They’d have to contact the province for a refund or receive a credit on the following year’s vacancy tax. The Ministry is offering support to disabled people through TaxAid BC and they’ve set up a call centre for people who need help, in multiple languages.
“Our goal is to make the declaration process quick and easy for all B.C. homeowners,” the spokesperson says.
Every homeowner in Vancouver is also required to submit an Empty Homes Tax declaration – and like the provincial tax, the property will be deemed empty and taxable if no declaration is made. In other words, the onus is on residents to declare their status or take the tax hit. It’s an approach that has some critics comparing it to the old negative-option billing that was banned by the federal government.
As of Jan. 29, the City said 89 per cent of owners had made their declarations, which can be made online, in person or on the phone. It’s unclear whether the City would refund the tax, as well as interest and penalty, to a homeowner who’s exempt but failed to declare the status of their home. If a declaration is not received by Feb. 4, the property is deemed vacant and subject to an additional tax of 1 per cent of the assessed value, plus a $250 fine. Payment is due by April 12 to avoid a 5-per-cent penalty. Any outstanding balance is applied to property tax as arrears, and if it remains unpaid, it can accrue interest of 7.7 per cent. The City holds an auction on properties with three years of unpaid property taxes every November at a “tax sale.”
When asked what would happen if a homeowner who is exempt fails to declare by the Feb. 4 deadline, Vancouver’s Vacancy Tax Manager Deepak Saini said in an e-mail that the owner would have to dispute the bylaw ticket. Once the bylaw ticket had been addressed and the property declared exempt, property owners would be able to submit a late declaration. The vacancy-tax levy would then be cancelled, although the property might still be subject to audit.
“We encourage anyone in difficult circumstances to assign a representative to complete their declaration accordingly,” Mr. Saini said.
The mix of new taxes and requirements being thrown at seniors concerns Ms. Mackenzie.
“Seniors, particularly those who are on limited income – and some of those people will be living in houses with high assessed values – it will cause them great anxiousness and anxiety to be worried about this. Whether the worry is real or not, it doesn’t matter. They are anxious about it. And that is unfortunate and that’s why I’m looking forward to talking to the Ministry of Finance people, and asking, ‘What message can we give people to reassure them?’”
Realtor Shelley Williams specializes in helping seniors who are buying and selling real estate. She says there are many older people living on their own who won’t be up to speed on the new taxes.
“It came up so quickly,” Ms. Williams says. “They don’t tell you, ‘this is going to happen in a year – get yourself organized.’
“It’s not going to work out well at all for someone like grandma who doesn’t pay much attention to the mail anymore. She’s 87, and her kids are in Toronto. They don’t know what’s going on with a new tax.
“I know there are issues, with people burying their money in real estate and leaving their homes vacant, but it’s got to be planned out for the ones with cognitive issues. For people that don’t respond to these letters, is the route going to be liens on the property? If you do that year after year after year, then what happens to grandma’s funds?
“Not everybody living on their own has a child looking after them, or has someone with power of attorney. We are really left to our own devices when it comes to elder care. And if you don’t have the money, what are you going to do? A lot of seniors are cash poor, equity rich.”
Dr. Ammann says the government should use the honour system, much the way the Canada Revenue Agency operates with income tax. He says the tax is targeting mostly B.C. residents who own second homes but who are not speculators.
He says the province should simply send out a letter to all residents where the SVT applies and ask them to register the status of any secondary residences.
“This is the Canadian way,” says Dr. Ammann, who calls the current negative-option billing style “totalitarian.”
“It would certainly be less onerous for everybody.”