Written on behalf of Feigenbaum Consulting
A ground-breaking class action law suit testing the legality of the British Columbia government’s foreign buyers tax kicked off this week in a B.C. court. The claim argues that the tax on foreign buyers violates the Canadian Charter of Rights and Freedoms by targeting individuals “whose national origin is from an Asian country, a class of persons that have historically suffered discrimination in British Columbia.”
The Foreign Buyers Tax
The tax in question was introduced in July 2016 by Mike De Jong, the provincial finance minister. It initially required foreign entities (including foreign nationals) to pay an additional 15% on the purchase of residential property in Greater Vancouver and was intended to cool down the housing market and address the affordability crisis that was affecting the city.
The current provincial government then increased this amount to 20% earlier this year and expanded the scope of the tax to also include the Fraser Valley, the Central Okanagan, the Nanaimo Regional District, and the Capital Regional District.
The Plaintiff’s Argument
The plaintiff, Jing Li, a Chinese student who moved to Canada in 2013 to finish a master’s degree, signed a contract to buy a home in Langley for $559,000 in the weeks before the foreign buyers tax was introduced. She argued that since the tax change, she had to pay an additional $83,850.
Li’s has a five person legal team, including a prominent constitutional law expert. She would like the tax to be declared illegal, and is seeking restitution of the hundreds of millions of dollars that the province has collected from foreign nationals in the last two years.
The Provincial Government Response
The provincial government has justified the introduction of the tax by saying that local residents were being priced out of the market. By 2016, real estate in the Greater Vancouver area had become some of the most expensive in the world. The average price of a single-family home had rise to $1.2 million, and the annual inflation had reached nearly 30%, which far out paced local income growth. Families were unable to buy homes and the future looked uncertain.
The province believes the court should consider all of these factors when making its decision, as they contributed to the government’s need to act and implement the tax.The province will argue that the tax is not in breach of the Charter, and that, even if it were, it would a reasonable limit permissible due to the pressing need for political action in the face of the housing crisis.
One of the three lawyers representing the province accused Li of clouding the legal issues by suggesting that the foreign buyers tax is motivated by racism by referring to things like the historic discriminatory acts such as the Chinese head tax, noting that “this is a smokescreen and not a theory…[t]here is nothing nefarious or racist in a government enacting measures that apply to all foreign buyers
We will continue to follow developments in this matter and will provide updates as they become available.
In the interim, if you need assistance with personal tax planning, speak to Mark Feigenbaum. We offer customized solutions for each of our clients that streamline compliance requirements and set them up to take advantage of all possible current and future opportunities to reduce their tax burden. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll free at (877) 275-4792.