Property sellers using loophole to dodge B.C.’s transfer tax

Liberals, NDP have no plans to block evasion of PTT

Jordan Bateman is B.C. director of the Canadian Taxpayers Federation.

Critics say a growing number of businesses or wealthy individuals are exploiting a loophole to avoid paying B.C.’s tax on property transactions while average home buyers are stuck footing the bill.

The Property Transfer Tax consists of one per cent charged on the first $200,000 in property value and two per cent after that – adding up to an extra $10,000 in tax when a $600,000 Metro Vancouver home changes hands.

But businesses in particular are making growing use of what’s called a “bare trust” corporation to hold ownership of a property.

The trust can be transferred to a new buyer without any change in the land title owner and no PTT is triggered as a result.

“The loophole is big enough to drive trucks through,” Canadian Taxpayers Federation (CTF) B.C. director Jordan Bateman said. “Accountants are all over it, especially corporate ones. It’s becoming standard tax practice and that tells you people are taking advantage of it.”

On a big commercial or industrial property sale, the savings can be significant and Bateman guesses the provincial government may be losing out on $15 to $25 million a year it should be collecting.

“If you captured some of that would you be able to trim down the overall Property Transfer Tax rate to make it easier for everyone?” he asked.

Exactly how much is being lost to the loophole is hard to determine.

Data obtained by the CTF through Freedom of Information show business and industry made up a declining share of the taxable transactions and PTT collected from 2006-11.

By 2011, residential properties made up 80 per cent of the $927 million in PTT collected – up from less than 70 per cent in 2006.

Just 291 industrial property transactions were taxable in 2011 (down from 1,041 in 2006) and resulted in PTT payments of $9.7 million, or one per cent of the total.

Business property sales totalled 2,334 (down from 4,276 five years earlier) and contributed $67.1 million, or 7.2 per cent.

Residential transactions also dropped after the 2008 recession and Bateman said they should outnumber the other categories.

But he said the residential share still looks “awfully high” to him.

It’s not impossible for residential property owners to use bare trusts, but Bateman thinks it’s rare.

Finance Minister Mike de Jong said in a statement the province is aware bare trusts can be used to dodge the PTT.

“While it has not yet been determined that a remedy is required, it may be challenging to design a remedy that doesn’t have other, unintended consequences,” de Jong said.

NDP finance critic Bruce Ralston said he’s aware of the manoeuvre but isn’t sure how prevalent it is.

He said the NDP has no plans to attempt to plug the loophole.

“I’m not sure how effective it would be,” Ralston said. “Sometimes when you put in anti-avoidance measures, people try other anti-avoidance measures.”

Bateman said the bare trust loophole underscores his position that simpler tax systems are generally better.

Just Posted

Mission’s Norm MacLeod is in Peru to train firefighters

It is the 10th time that the assistant fire chief has volunteered to attend and teach these sessions

Silverdale students study gym-sized map of the Indigenous Peoples of Canada

The map is one of only five in existence across Canada and is the only one in B.C.

Former Mission educator receives national Indigenous role model award

Kimberly Sommer, now in Abbotsford, went to Edmonton last week to receive the Indspire role model award

Friends describe murder victim as ‘most caring guy we knew’

Jagvir Malhi of Abbotsford was not involved in gangs or criminal activity, they say

Ten-year sentence for man convicted of belt-strangling death in Abbotsford

Shayne McGenn guilty of manslaughter in 2016 death of David Delaney, 63

Trudeau offers to help Pacific islands face climate change impact

Prime Minister Justin Trudeau met with the leaders from the Pacific island nations on Saturday during the APEC Summit in Papua New Guinea

Canadian military’s template for perfect recruits outdated: Vance

Gen. Jonathan Vance, the chief of defence staff says that the military has to change because the very nature of warfare is changing, particularly when it comes to cyber-warfare

‘Toxic’ chosen as the Word of the Year by Oxford Dictionaries

Other top contenders for 2018 include ‘gaslighting’ and ‘techlash’

RCMP bust illegal B.C. cannabis lab

Marijuana may be legal but altering it using chemicals violates the Cannabis Act

1 woman dead, man in hospital after ‘suspicious’ crash: police

Homicide investigators and Burnaby RCMP are investigating the fatal collision

Canada defeats Germany 29-10 in repechage, moves step closer to Rugby World Cup

Hong Kong needs a bonus-point win over Canada — scoring four or more tries — while denying the Canadians a bonus point

Avalanche Canada in desperate need of funding

The organization provides avalanche forecasting for an area larger than the United Kingdom

5 B.C. cities break temperature records

Parts of B.C. remain warm, at 10 C, while others feeling chilly

B.C. teacher’s Amazing Race takes students on Canada-wide adventure

Agassiz high school students say they had the experience of a life time

Most Read