"Homeowners will file an annual tax declaration which will help tax administrators demonstrate whether owners need to pay the tax,” Finance Minister Carole James told the legislature last fall.
It was one of many details being scrutinized at the time, and the full import of what she said wasn’t explored.
It landed a lot harder this week, when the Finance Ministry outlined what that entails. Collecting the tax means a lot of administrative work for government and an annual chore for tens of thousands of homeowners.
The NDP government’s plan is to tax owners of vacant homes in the five most populated regions of B.C.
But there’s no easy way to figure out whose homes are vacant. So the tax collector is starting from the assumption that the speculation tax applies to every single property owner in those regions.
Homeowners will have to fill out a new declaration form that their homes are occupied in some fashion in order to win an exemption.
Every homeowner in most of the capital, Metro Vancouver and Fraser Valley regions, along with Kelowna and Nanaimo, will be getting notices soon. And they’d better pay attention when it arrives, because ignoring it means they’re automatically assumed to be speculators and they’ll be penalized several thousand dollars a year.
The current rate is a half-per cent of assessed value — $5,000 on a million-dollar property.
“If you don’t complete your declaration, you’ll receive a tax notice charging you the tax at the maximum tax rate,” the ministry warns.
As well, co-owning spouses each have to fill out the form annually.
The ministry is mailing out 1.6 million notices to homeowners in speculation-tax areas starting this week. The working estimate is that a small fraction (about two per cent) of homeowners will have to pay the new tax.
But the declaration is an important new wrinkle in the paperwork associated with owning a home.
The ministry arranged a demonstration Wednesday of how to fill it out online. In the simplest possible scenario — Canadian citizen, B.C. resident, owner-occupier who pays taxes in B.C. — it took three minutes.
But the government’s website devoted to the speculation tax (gov.bc.ca/spectax) has reams of complicated additional information on the many complexities for anyone who doesn’t fit the example.
Anyone who wants to test their logic skills can check out the details on arm’s length versus non-arm’s length relationships pertaining to tenancy requirements for speculation-tax exemptions.
“A person who is at arm’s length is a person who has no special advantage in their dealings with you. On the other hand, family members, such as parents, adult children or siblings, can never be at arm’s length.
“Friends may also receive similar advantages. This type of relationship is referred to as ‘non-arm’s length.’ ”
The speculation tax has become progressively more complicated since the day it was unveiled in the February 2018 budget.
It was first billed as a bold but somewhat vague attack on foreign speculators. B.C. was going to grab two per cent of the value of their vacant homes every year and use it to solve the affordability crisis.
Then the government started monkeying around with the zones where it applied, exempting bits and pieces here and there. Then it set different rates for foreigners and Canadians.
The defence of the tax eroded when it developed that the tax credits protecting British Columbians from the tax covered only part of the bill, not all.
Then the Greens balked and James had to compromise and adjust it further.
Non-British Columbian Canadians were to be taxed the same as British Columbians. And James has to meet mayors once a year to hear their views on how the speculation tax is working.
It’s supposed to bring in about $185 million this year. It’s going to take a fair amount of work sorting out eligibility, answering questions and hunting down evaders to bring it all in.
Just So You Know: James doesn’t have to wait to meet mayors to learn how it’s going. She’ll also get a sense from the byelection Jan. 30 in Nanaimo, where news of this landed right in the middle of a campaign the NDP is desperate to win.