Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/981086
CmB magazIne cmba-achc.ca spring 2018 | 35 on communities with many vacation homes, such as Kelowna and parts of the Gulf Islands included in the Capital Regional District. e properties are oen not of the sort B.C. residents use as principal housing. n e tax could cause a glut of sales and other market pressures devaluing the properties, without having any positive impact on housing for B.C. residents. is would reduce the tax base for the local authority levying property taxes. n e mass exodus of people could mean loss of revenue for local businesses such as restaurants, gas stations and other sales and service operations. n e drop in property values could leave mortgage holders without sufficient collateral for their debt and hence result in financial losses for them. n e tax fundamentally and significantly changes the landscape for people who purchased properties under a different set of rules. It could make properties that once fit people's financial circumstances unaffordable. Owners may not be able to afford the substantial increase in annual taxes and the reduced sale price might not allow them to retire mortgages registered against the property. n Second homes that are rented out full-time will be exempt from the tax, but this option is not practical for owners who use their property on anksgiving, Christmas, spring break, summer holidays or other occasions. e exemption applies essentially if the owner of the second home stops using it as a second home but uses it as a rental unit (that is, as a speculation investment). e irony is inescapable. n e longer a person owns the property, the less that person is a speculator but the more years the person pays in speculation tax. doES B.C. hAvE ThE LEGAL rIGhT? Can B.C. assess a higher tax, as compared to that paid by British Columbians, against people who own a home in B.C. but do not reside in it and do not pay income tax in B.C.? Court history would indicate that it probably can do so. e Constitution, by topic, divides powers between the provinces and the federal government. Citizenship has been accepted as being within the exclusive powers of the federal government. While this includes the power to define how citizenship may be lost and acquired, it is less clear which level of government has the power to grant or limit rights and obligations of citizenship. e following are key decisions in this regard. In 1899, the Privy Council (at the time, the highest appeal court for Canada) struck down B.C. legislation prohibiting people of Chinese descent, whether foreign or citizens, from being employed in coal mines. e Council said the B.C. legislation concerned nationalization and aliens, an exclusively federal power under our Constitution (then the British North America Act). e Council said that the issue concerned nationalization and aliens – a federal power under the Constitution. It said that the power included "the rights and privileges pertaining to residents of Canada aer they have been naturalized." In 1902, the Privy Council upheld B.C. legislation that prohibited Japanese-Canadians and Chinese-Canadians from voting. e Council said that the federal government had the exclusive power over naturalization but that naturalized citizens got their right to vote not from being naturalized but rather from legislation. Accordingly, municipalities had the right to determine who could vote, including declining the right to any naturalized ethnic group. In 1951, the Supreme Court of Canada said that the institution of a common Canadian citizenship was a fundamental accomplishment of confederation; all Canadian citizens should be able to move freely from one province to another, for otherwise "the country could be converted into a number of enclaves and the 'union' which the original provinces sought and obtained disrupted." In 1976, the Supreme Court of Canada upheld a Prince Edward Island law that limited the amount of land that could be held by someone who was not a resident of the province. e Court said that the law was actually one about property and civil rights (provincial powers) rather than about citizenship or naturalization. e legislation essentially regulated land ownership within the province — a subject of legitimate provincial concern, especially in P.E.I.'s case with its historical struggle against absentee land ownership. e Morgan case has been followed in several cases, including in 1977 by the Ontario High Court of Justice to uphold Ontario legislation imposing special land transfer tax on: n non-Canadian citizens unlawfully in Canada, or lawfully resident in Canada but not entitled to remain here; and n non-residents, whether Canadian citizens, aliens or otherwise. e Court said that the legislation concerned acquisition and holding of land in Ontario and was not legislation in relation to aliens or citizenship. In 1978, the Constitution was amended prior to its repatriation. e federal government wanted to include reforms strengthening the economic union and mobility rights. is would have made it a Charter right to acquire property or gain a livelihood in any province. Ultimately this right was narrowed to include only the right to reside or gain a livelihood in any province. While small differences in facts can sometimes lead to significantly different outcomes in law, it appears B.C. has the right to levy the speculator tax against non-British Columbians. Why ALL CAnAdIAnS ShouLd BE WorrIEd Even if the tax were otherwise logically sound, it is troubling that it draws the limit of the exemption at the B.C. border rather than the Canadian border. People who pay federal tax do contribute to B.C. as federal and provincial public works do not occur in silos (for example, the federal government uses taxes collected from across Canada to contribute to B.C.'s infrastructure). e tax ignores that B.C. belongs not just to British Columbians, but to all Canadians; just as all parts of Canada belong partly to British Columbians. If other provinces were to follow B.C.'s approach, British Columbians could be more excluded from owning real estate in other provinces. ouTLook For B.C.'S TAx e B.C. Ministry of Finance says more details will emerge when legislation for the tax is draed. e Finance Minister has indicated that consideration is being given to changing the scope of the terms already released, particularly in light of the considerable opposition to the tax and concerns raised by various communities and other stakeholders. 5 6 7