Christy Clark Reverses Foreign Buyers Tax for Foreigners with Work Permits
Late last night Christy Clark announced she would be reversing the 15% foreign buyers tax for foreign workers who work, live and pay taxes in Metro Vancouver. To little surprise it caused a basket of mixed emotions. Many are concerned this could create loopholes for wealthy foreign investors to re enter the market and inflate prices once again.
My thoughts echo those of UBC Economist Tom Davidoff’s who welcomed the province tying the tax exemption to someone’s work permit – a federal document that is hard to forge. But he worried there could be a massive loophole if foreign buyers were allowed to duck the tax by paying nominal amounts of provincial income tax on their global wealth. He added that the new exemption should not lead to a new spike in foreigners buying in Metro Vancouver’s lagging market because relatively few people are on work permits.
So, will this leniency create more tax loopholes? For example, international student work permits allow students to only work 20 hours per week. Will an international student use the work permit to skirt the 15% tax and use foreign capital from Mom & Dad to buy real estate. Such as the student who bought the 31 Million dollar Vancouver mansion.
Although this is certainly a possibility it’s a lot of work and added risk to purchase into a falling market. (See The Good The Bad and the Ugly) Not to mention further tightening of China’s capital outflows and this seems highly unlikely to move the needle.
All in all this is once again more of a political move as we move closer towards elections. A juggling act of keeping the real estate market afloat while trying to appease voters and local businesses that are struggling to recruit outside talent.