1. Axe the Tax: The Carbon Tax on the Conservative Federal Election Platform
The slogan "Axe the Tax" has been making waves, especially in the context of the Conservative federal election platform's promise to eliminate the carbon tax. The pitch is clear: Canadians are feeling the strain of rising costs, and the carbon tax has become a lightning rod for frustration. The Conservatives argue that by axing this tax, they can reduce costs for families and businesses while boosting the economy. But what if we told you there’s another tax, far less discussed, that has been quietly impacting British Columbians for decades?
2. A Different Tax: BC’s Property Transfer Tax
This article isn’t about the carbon tax—it’s about the Property Transfer Tax (PTT) in British Columbia, a tax that has remained largely unchecked since its introduction in 1987. Unlike the carbon tax, which has seen public debate and policy shifts, the PTT continues to burden property buyers without significant adjustments to reflect modern housing realities. It’s a tax that has far-reaching implications on housing affordability, and it’s time to find better solutions.
3. The Origins of the Property Transfer Tax
The PTT was introduced by the BC Provincial government in 1987 as a measure to generate revenue, tax speculation transactions and manage the province’s real estate market – ideally keeping housing affordable.
• At the time, housing prices were significantly lower in the $150,000 range, and the tax was structured to appear modest. Buyers were required to pay:
o 1% on the first $200,000 of a property’s value and
o 2% on the portion above that.
• In recent years, additional brackets have been added, with rates climbing to
o 3% for values over $2 million and
o 5% for properties above $3 million.
Note : specific exemptions may apply.
The initial justification was to tax wealthier individuals purchasing high-value properties, but with skyrocketing home prices, even modest homes are subject to significant PTT costs.
4. Where Does the PTT Revenue Go?
The revenue from the PTT is directed into BC’s general revenue fund, which supports a variety of public services, including healthcare, education, and infrastructure. In 2021 alone, the PTT generated over $2 billion for the province. While these funds undoubtedly contribute to essential services, the growing reliance on this revenue stream has created a conflict: the government benefits from rising property values, but this comes at the expense of housing affordability for residents.
5. The Impact on Housing Affordability
The PTT has a cascading effect on housing affordability. Each time a property is sold, the buyer pays the PTT, which becomes a sunk cost in the transaction. Sellers, in turn, factor this cost into their asking price, ensuring they recoup what they paid—and more—to make a profit. For example, if the PTT adds $20,000 to the cost of purchasing a home, sellers are unlikely to accept offers that don’t account for this tax. Human nature seeks to sell at a price higher than the cost of purchase overall. This behavior inflates property prices over time, pushing homes further out of affordability, reducing market liquidity and lowering inventory as owners hold onto properties until values exceed these sunk costs.
6. An Example of PTT’s Snowball Effect
Consider a property initially purchased for $1,000,000. The buyer pays a PTT of $18,000. Factoring the PTT without other closing or associated costs, here is an example of a property selling 3 times with the Sellers increase to recoup just the PTT on each transaction:
• First Sale - $1,000,000 + $18,000 = $1,018,000
• Second Sale - $1,018,000 + $18,360 = $1,036,360
• Third Sale - $1,036,360 + $18,727 = $1,055,087
• On just 3 transactions for PTT alone is a $55,087 increase or 5.5%
This tax-driven price escalation compounds over time, making homes progressively less affordable with each sale.
7. Solutions to the PTT impacting Housing Affordability
This isn’t a complaint—this is an open discussion for actionable solutions. We understand taxes provide government funds for infrastructure improvements and maintenance. Providing transparency on the below is a step in the direction to help identify solutions to avoid increasing property sale prices:
• What is the actual PTT revenue amount for the government
• What is the cost for PTT administration
• How is the revenue specifically allocated beyond just the administration
As taxes are implemented, it is on very rare circumstances that the taxes will be removed as the revenue becomes utilized by Government there must be a replacement. In 2015 the BC Premier mused about removing the PTT, “"Why don't we do it in this budget? Because this year we brought in $928 million in revenue. The only way to replace that would be to raise taxes elsewhere." This unfortunately did not proceed further.
The PTT could be restructured to mitigate its impact on housing affordability while still supporting public services. Exemptions implemented such as:
• First Time Home Buyer’s program with fair market value of $835,000 or less (along with other criteria)
• New Built home under $1,100,000 (criteria applies)
may help with specific Buyer situations, however the overall market increases per sale would still be affected as these exemptions are a very small percentage of the transactions.
Housing affordability is the main discussion on this article, supply and demand are key, as supply is being built with the examples of PTT affects on subsequent sales, will we continue to fuel higher prices as PTT remains as is?
As solutions are best addressed with clearly understanding the problem, transparency on how the revenue is spent is key to understanding going forward how efficiency may be applied first, then reviewing how lowering to what level or removing the PTT entirely may be possible without impacting essential services.
Let's have open for discussions, what are the steps to solutions beyond transparency, is tax the defacto for solving problems?
Sir Winston Churchill’s quote stated otherwise : “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”
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