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Andrey Pavlov: Vacancy Tax A Good Idea That’s Been Badly Implemented

Andrey Pavlov: Vacancy tax a good idea that’s been badly implemented

By ANDREY PAVLOV for Vancouver Sun

Consider somebody who owns property in Vancouver but does not use it, does not rent it and does not pay any income taxes in Canada. This person is clearly benefiting from our society because over time their property is gaining value.

It seems reasonable to ask them to contribute a bit through a marginally higher property tax payment. Plus, an absentee owner potentially detracts from the vibrancy and livability of the community. Therefore, the extra revenue should be used to reduce property taxes or otherwise compensate the nearby residents. Above all, an empty homes tax would get a few property owners to rent or sell their empty homes, either way increasing our housing supply.

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For sure not a perfect solution, the infringement on property rights being a serious issue. But until we gather the political will to remove the obstacles to new housing supply, a vacancy tax can be justified. It is not surprising, then, that an idea along these lines was proposed by a number of local economists, myself included. Both the City of Vancouver and the province took notice.

It is truly unfortunate they both made a real mess of it.

To start, Vancouver offers no relief from the vacancy tax, regardless of how much income tax you are already paying in Canada. The provincial government offers a modest relief — vacancy tax paid generates a $2,000 non-refundable tax credit against B.C. income taxes due. In other words, if you pay income taxes in B.C. you get a small break on the vacancy tax. But this is just a token, not a real exemption, considering that the vacancy tax will likely cost you substantially more than the credit. Income tax paid elsewhere in Canada does not count.

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