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

Fraser-Cascade school district hosts by-election to fill void left by passing of Tom Hendrickson

Advance voting begins on July 17, with general voting on July 27

Okan brings Cuban rhythm to Harrison Festival of the Arts

The Cuban band from Toronto will be performing a concert and holding a workshop

Sts’ailes drum making coming to Harrison Festival

The workshop has been happening for years, bringing Indigenous teachings to the festival

Transparency, dialogue key to UBC Dairy’s open house

The annual Agassiz event invites the public to come learn about dairy farming and research around it

Chilliwack lagging real estate sales mirrors provincial trend

Forecast for 2019 is a drop from 2018 but a bounce back predicted for 2020

VIDEO: Agassiz remembers local officer at grave-marking ceremony

Montague White-Fraser had been buried in the Old Cemetery for 92 years without a headstone

Report of dead body in B.C. park actually headless sex doll

This discovery, made at Manning Park on July 10, led police to uncovering two other sex mannequins

Grand Forks fire chief found to have bullied, harassed volunteer firefighter: report

WorkSafeBC, third-party human resources investigation looking into allegations complete

Dog recovering after being drenched in hot coffee, B.C. man charged

Man was taken into custody, charged, and released pending a court date

Taekwondo instructor, 21, identified as B.C. bat rabies victim

Nick Major, 21, an instructor at Cascadia Martial Arts in Parksville

Science expedition to Canada’s largest underwater volcano departs Vancouver Island

Crews prepared for a two-week research mission to the Explorer Seamount

B.C. shipyard to get one-third of $1.5 billion frigate-repair contract

The federal government has promised to invest $7.5 billion to maintain the 12 frigates

Worried about bats? Here’s what to do if you come across one in B.C.

Bat expert with the BC Community Bat Program urges caution around the small creatures

B.C. on right road with tougher ride-hailing driver rules, says expert

The provincial government is holding firm that ride-hailing drivers have a Class 4 licence

Most Read