Anti-avoidance in the Property Transfer Tax Act

I won’t get into my thoughts on the impact of charging a higher rate of tax to non-Canadians here, but I noticed a strange choice of words in the BC Government’s Bill 28 from this week.  I wrote the following email to Minister De Jong who introduced the bill explaining it and thought I’d share it here.

Minister De Jong,

(With copies to my local MLA Melanie Mark, Minister Responsible for Housing Rich Coleman, and Opposition Spokesperson for Housing David Eby)

I was encouraged this week to see the government finally reacting to the real estate situation in the Lower Mainland.  While I personally do not agree with the widely-held view that non-resident buyers are the primary source of the affordability problem in Vancouver, I think that the changes made in this bill are a good starting point to improve the housing situation in the Lower Mainland. I am especially encouraged by the allocation of the funds raised by the new tax towards the Housing Priority Initiatives special account.
I would like to call to your attention something that I believe is a shortcoming in this bill, specifically with respect to the avoidance provision.  The way I interpret the new section 2.04 of the Property Transfer Tax Act, it applies only to the new Additional Tax, and not to property transfer tax in general. This is put into effect by the definition of “tax benefit”, being “a reduction, avoidance or deferral of tax payable under section 2.02,” where section 2.02 is the charging provision for the new additional tax.
I’m glad that this anti-avoidance provision is included in the legislation, and I’m especially encouraged to see the government has chosen the wording almost directly from ss. 245(2) of the Income Tax Act.  As a Chartered Professional Accountant, I believe the GAAR to be a robust tool for addressing tax avoidance. What I am concerned about, however, is that no such avoidance provision appears to exist anywhere else in the Property Transfer Tax Act.  Does this imply that, absent any specific avoidance provisions, general avoidance of the property transfer tax is still to be allowed?
Given the recent series of media stories showing the many ways in which property transfer tax can be avoided, particularly through assignment, I would like to suggest that before this bill is passed it be amended to change the avoidance provision. This provision should cover all property transfer tax, and not just the additional tax.  If I might, I would suggest changing the section number to 2.3 and changing the definition of “tax benefit” to: “means a reduction, avoidance or deferral of tax payable under this Act.”  In fact, this is the wording the Income Tax Act uses, so I find it curious that the wording was intentionally changed to exclude the regular property transfer tax. Given the intent of general anti-avoidance provisions, I see no reason that the regular property transfer tax should be exempt from anti-avoidance provisions such as this.
Yours sincerely,
Neal Jennings

2 responses to this post.

  1. good argument.


  2. Almost two years later, this week’s budget FINALLY announces it will “extend the general anti-avoidance rule to the entire Act.”


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