British Columbia’s high housing prices are harmful to the public interest, a BC Supreme Court judge stated in a ruling that dismisses an injunction application against the speculation and vacancy tax that aims to address the affordability crisis.
In a ruling dated April 16, Justice Janet Winteringham tossed out the joint petition of nine individuals to restrain the provincial government from enforcing the tax.
The judge accepted “with little hesitation” the provincial government’s position that the harm to government and the public interest easily outweighs the harm alleged by the petitioners.
The judge described the NDP government’s public interest argument for the tax as “concrete, tangible and compelling.”
The government posited in court that housing affordability is “the most pressing issue facing the 21 municipalities that comprise Metro Vancouver.”
The government argued, “Hundreds of thousands of British Columbians are negatively impacted by the housing affordability crisis. Surveys show that 45% of Metro Â鶹´«Ă˝Ół»residents are seriously considering leaving Metro Â鶹´«Ă˝Ół»because of the high cost of home ownership, and that 83% of the renters consider rental prices to be unreasonably high.”
The government also noted in its submission that vacancy rates have improved since the tax’s imposition. The tax also represents an estimated $185 million revenue stream and “administrative chaos” would ensue if the injunction were granted.
The nine petitioners had sought an interlocutory injunction to suspend the tax before challenging the tax on constitutional grounds in a future court proceeding. Hence, the judge’s remarks on the evidence are considered preliminary.
The petitioners needed to establish three things for an injunction: that there was a serious question concerning the constitutionality of the tax; that they would suffer irreparable harm should the injunction be denied; and that the public interest aligns with their own.
On the question of public interest, “the harm described and the evidentiary record the petitioners present, is largely speculative and based on deficient financial information,” ruled Winteringham.
In other words, they didn’t prove scrapping the tax would be in the public interest, if not only their own interest.
The judge suggested the petitioners may have put the horse before the cart in their injunction application, considering they did not yet receive their 2019 tax assessment.
“With respect to proof of irreparable harm, the petitioners have not yet received their tax assessments under the [tax], although those assessments will be delivered shortly.”
And, “For the most part, the petitioners attest that they cannot afford to pay the Tax but have not provided any evidence regarding their individual financial circumstances,” wrote the judge.
With respect to there being a serious question over the constitutionality of the tax, “I agree with the respondent (government) that the petitioners’ Charter analysis is flawed,” stated the judge.
“The submissions as framed could very easily be viewed as a claim for protection of economic rights – something the drafters of the Charter specifically, and with intention, excluded. … I question the strength of the constitutional challenge, as framed and based on the evidence tendered,” wrote Winteringham.
Addressed were the petitioners’ claims the tax violated equality rights, indirect taxation, liberty and security of the person and mobility.
Winteringham acknowledged “the difficulties of assessing the strength of a constitutional case in interlocutory applications,” however the weakness of the petitioners’ case outweighed the risks of granting relief.
Notably, the petitioners had argued that the definition of “untaxed worldwide earner” is discriminatory, but the government responded that the only distinction is based on where the family reports income for a calendar year. “The untaxed worldwide earner provisions do not draw a distinction on the basis of sex, or any other protected ground” under the Charter, argued the government.
The injunction was sought pending a full hearing on the constitutionality of the challenged legislation, and the parties agreed that the full hearing could not be accomplished before the next election. This delay provided even more pause to the judge.
“Candidly, the petitioners admitted that they were not seeking an immediate hearing date. Rather, they expected to proceed with class certification issues and then take steps to schedule the matter for hearing,” wrote Winteringham.
“In circumstances where the petitioners have not booked hearing dates for the petition or outlined a schedule of steps by which they propose to bring the petition, I have grave concerns about the granting of the extraordinary remedy sought here.”
Furthermore, if the tax were ever deemed unconstitutional, the judge noted any payments could be refunded.
With various exemptions, the tax is largely targeted at owners of unoccupied homes and satellite families who report less than 50% of their worldwide income in Canada. The rate is 2% of a property’s value for foreign owners of homes that are not rented to a primary resident of B.C. as well as for satellite families. Canadian citizens or permanent residents of Canada who are not members of a satellite family and who do not reside in B.C. but leave their properties unrented for more than half the year are charged 0.5%.
The tax also serves to establish a confirmation of residency for tax purposes, which can assist the federal government with reporting of income taxes and/or issuance of social safety net benefits, such as healthcare.
The next cycle of tax administration was scheduled to commence in January 2020 with mass mailouts to 1.6 million property owners. The government submitted to court that “extensive preparations have been made for the upcoming administration cycle, including entering into a multi-million-dollar contract with a third-party contractor to set up an SVTA-related call centre.”
Here is a court summary of the nine petitioners’ circumstances:
a) Hugh and Heather Bacon have owned a property in Sidney, BC as joint tenants since 2010. The Bacons also own a residence in Ontario where they are currently living. They file taxes as residents of Ontario, where Ms. Bacon is receiving cancer treatment. In 2018, the Bacons were assessed $4,790 pursuant to the SVTA. The Bacons intend to spend their retirement years in BC but have remained in Ontario, for six months in each of the last two years, for Ms. Bacon’s medical treatment;
b) Claire Lynn Carlin is a Canadian-American dual citizen residing at a property in Victoria, BC. She has been the registered owner of the property since 2017. Her spouse is American and resides primarily in Washington state. It is submitted that Ms. Carlin will be subject to a tax of approximately $20,620 in 2019, equal to 2% of the assessed value of the property. This is because her spouse’s American retirement income is greater than her Canadian retirement income. The petitioners submit that this disqualifies her from seeking the principal residence exemption even though the Victoria property is her principal residence;
c) Linda Anne Gillooly is a Canadian citizen residing at a property in Victoria and has been its registered owner since 1992. Ms. Gillooly’s spouse is a citizen of the Cayman Islands where he resides full-time. For 2019, Ms. Gillooly resided in Victoria for about seven months so she could care for her elderly mother. For 2019, it is anticipated that she will be subject to a tax of $29,180 pursuant to the SVTA. She submits that is because she is taxed on that basis that she is an untaxed worldwide earner because her spouse’s non-Canadian retirement income exceeds her basic retirement income;
d) Maryam Khorshid-Sevar is a Canadian citizen, having immigrated from Kuwait in 2001 and is the mother of three adult children all residing at a property in North Vancouver. She has been the registered owner of the property since 2004 and her children live there full-time. Ms. Khorshid-Sevar’s spouse works in Kuwait as he was unable to find a job in Canada due to his limited skills with the English language. In the past years, Ms. Khorshid-Sevar has spent more time in Kuwait to care for her spouse who suffers from a heart condition. For 2019, she anticipates receiving a tax assessment of approximately $46,500 pursuant to the SVTA;
e) Debbie Lynn King is a Canadian citizen and mother of two autistic children. She resides at a property in Victoria and has been its registered owner as joint tenant with her spouse since 2010. In 1996, Ms. King moved from Canada to the United Arab Emirates for employment and married her spouse in 2000. After they had children, Ms. King was their primary caregiver. Pursuant to the SVTA, Ms. King and her spouse anticipate receiving a tax assessment for 2019 of approximately $29,800. She is taxed as an “untaxed worldwide earner”, she submits, because her spouse’s non-Canadian earnings exceed her income. She and her children live full-time at the Victoria property;
f) Rebecca Lloyd is a retired American citizen. She resides at a property in Victoria and has been its registered owner since 2003. Based on medical advice regarding a neurological condition, Ms. Lloyd spent considerable time in Victoria since 2003. She and her spouse have a residence in Maryland, Washington. She states that their home in Victoria serves as a place of respite for her and that she and her spouse reside at the Victoria property for 160-180 days per year. She states, however, the couple is required to stay in their residence in Maryland so she can seek her ongoing medical treatment there. Collectively, the couple anticipates receiving a tax assessment pursuant to the SVTA of $31,360 in 2019;
g) Leslie Speyer-Ofenberg sold a property in Â鶹´«Ă˝Ół»in October 2019 stating that he was unable to afford the Tax. Mr. Speyer-Ofenberg has received pension income from the United States for the past 15 years and as such, was paying taxes in the United States. Mr. Speyer-Ofenberg was exempt from paying the SVTA tax in 2019. However, in anticipation of a tax assessment for 2020, Mr. Speyer-Ofenberg sought to avoid the risk by selling the Â鶹´«Ă˝Ół»property; and
h) Robin Trevor Peter Wakefield is a Canadian citizen residing at a property in Victoria and has been its registered owner since 2009. He has spent considerable time in the United States, moving to Silicon Valley in 1998 for employment and returning to Canada in 2005 to look after aging parents. In 2015, he married his spouse, a dual citizen. In 2016, Mr. Wakefield became a US resident. The couple thereafter spent time in Victoria (approximately six months of the year) and Tucson, Arizona where his spouse has a residence. The anticipated SVTA tax assessment is approximately $7,796 for 2019.
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