Premier Christy Clark says she wants to eliminate B.C.’s Property Transfer Tax over the long term but the province can’t yet afford to forgo the billion dollars a year it generates.
The premier was asked about the provincial tax on real estate transactions at an appearance Wednesday before the Surrey Board of Trade.
“When we really start making a dent on our debt we really want to start knocking down the Property Transfer Tax, because it’s a drag on our economy,” Clark told the business audience. “We’re not quite in a position to be able to do that yet but It is absolutely part of our long-term plan to get rid of it.”
The PTT consists of one per cent charged on the first $200,000 of a property’s value and two per cent after that. For a $600,000 house, it means $10,000 is due every time it changes hands.
The province collected $1.04 billion in PTT in the 2014 fiscal year but projects that will drop to $928 million this year due to an expected decrease in property sales.
Questioned later, Clark declined to give a timeline for the idea and downplayed the comments.
“I wouldn’t characterize it as a promise,” she said. “It’s something that we’d like to do. A promise is something we believe we can do. We don’t know that we can do it yet. It’s a billion dollars in revenue for government.”
Clark said she would like to at least cut the tax to improve home affordability, but said the money would have to be made up elsewhere.
The PTT raises significantly more than the government gets from either forestry ($757 million), natural gas royalties ($542 million) or tobacco taxes ($770 million.)
It’s not the first time Clark has dangled populist suggestions of tax or fee relief far down the road. During the 2013 election campaign, she said Port Mann Bridge tolls could be eliminated ahead of schedule once a windfall from LNG begins to arrive.
Realtors during that campaign urged the province to at least increase the threshold at which the two per cent portion of the PTT kicks in to reduce the amount of tax charged on average to higher end homes in Metro Vancouver.
Rising property values have made many more homes subject to the two per cent portion because the $200,000 threshold has never been increased since the PTT was created 28 years ago. There are some exemptions for family transfers and first-time home buyers.
The government’s PTT take has fluctuated with the pace of real estate sales, but has more than tripled from $302 million in 2001.
The province rejected a suggestion from TransLink in 2010 that it help fund transit by sharing revenue from the PTT, half of which comes from the Lower Mainland.
The PTT has also been controversial because businesses and wealthy individuals can avoid paying the tax by holding real estate within a bare trust corporation and selling that shell company to the new buyer.
Clark highlighted B.C.’s “hat trick” of three straight surpluses in her Surrey speech one day after the release of the provincial budget.
Continuing the hockey analogy, she said it’s critical to play both strong defence in the form of debt control and offence in pursuing opportunities to grow the economy.
Clark noted B.C.’s debt-to-GDP ratio – a key measure of the ability to service debt – is now 17.7 per cent and falling, compared to a national average of 31.5 per cent, nearly 40 per cent in Ontario and nearly 55 per cent in Quebec.