International Trade Committee on June 5th, 2023

[Arif Virani, Liberal, Parkdale—High Park, ON]

Okay.

Mr. Halinda, can you comment? If I understand it correctly, the gravamen of your concern is that it's fine that we have a usage requirement of 28 days, but you're concerned about how the eligible area is defined. You're saying that pursuant to the census, which we're using as the criterion, it's casting too wide a net in fairness from your perspective.

[Richard Halinda]

Yes.

[Arif Virani, Liberal, Parkdale—High Park, ON]

How would you propose that it be recast?

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Chair, the interpretation was interrupted.

[The Vice-Chair, Conservative, Kyle Seeback]

Can we check the interpretation?

Is the interpretation functioning now? Yes. That's excellent.

I'll give you 20 or 30 seconds more. Please repeat the question.

[Arif Virani, Liberal, Parkdale—High Park, ON]

I'll repeat the question.

I understand that the gravamen of your concern is that there's a 28-day exemption. If you're using it for 28 days or more, that's great, but it only applies to certain eligible areas. In terms of the way an eligible area is defined, whether a place is rural or urban, that net has been cast a bit too wide based on the census that we're using as a criterion.

That is my understanding. Is that correct?

Secondly, how would you propose that we redefine what an eligible location is for this exemption?

[Richard Halinda]

Yes, they have this eligibility for this 28 days only in the rural areas. If you're in an urban area, you're not entitled to the 28-day exemption. To me, if you're using it, you're using it. One of the suggested changes I made was to have that differentiation between rural and urban eliminated. What do we need that for?

[Arif Virani, Liberal, Parkdale—High Park, ON]

Would you agree that there are acute housing and costing issues in urban centres in Canada?

[Richard Halinda]

Yes, I do—in the urban centres, absolutely.

I'm a little bit familiar with Toronto. I don't know how many cottages there are in Toronto.

[Arif Virani, Liberal, Parkdale—High Park, ON]

If there was no rural or urban divide, effectively, would the exemption of 28 days apply to a downtown Toronto condo, or one in Montreal, Calgary or Vancouver?

[Richard Halinda]

I see where you're coming from on that, so there definitely needs to be something with that. Again, if you're looking at the type of residential unit it is, you could work through that, I would think.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Pursuant to what Mr. Baldinelli said, I think it would definitely be helpful to see the proposed changes in writing, because that would be helpful for our deliberations.

I'll stop there. Thank you.

[The Vice-Chair, Conservative, Kyle Seeback]

Mr. Savard-Tremblay, you have the floor for six minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

I acknowledge my colleagues and thank all the witnesses for their presentations.

Mr. Halinda, my first question will be along the same lines as the one Mr. Virani asked you.

The definition of a cottage should focus more on the building than on the distinction between rural and urban. I think that's sort of the door you were opening at the end of your remarks. When we think of a cottage, we immediately think of a rural community. I don't know if you have any figures on that, but I imagine that the vast majority of buildings called cottages that are subject to the tax are in rural areas.

[Richard Halinda]

I don't have any data on how many would be in the rural area as opposed to the urban area. I don't have that.

I do the filings for all of my American clients on this UHT, so I've been actually on the ground with this. I can tell you from my experience that there are countless within the urban area that are affected by this. They have to do this, whereas if that cottage were half a mile or a block away, they wouldn't have to do this. That's where I think the inequity lies.

I don't have the numbers, but we could get those for you if you wanted us to, for sure.

Hopefully that answers your question.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Yes, absolutely. I think the crux of the problem is probably going to be in the definition of buildings. There are secondary residences, and as Mr. Virani was saying, a condo in the downtown core that is a secondary residence could be considered a cottage, whereas the word “cottage” refers to a property in a rural community most of the time.

Are there any actual verification mechanisms for the famous 28 days you are talking about, or is it based solely on the owner's statement?

[Richard Halinda]

That's a very good question.

I've worked a lot with CRA over the past number of months to try to get answers to how they're going to interpret these exemptions, because the tax return is complicated and you have to check out boxes. I've talked to some very good people at CRA. Basically I'm told that the policies will be developed as we go along, which makes it difficult for an adviser to tell somebody what to say or not to say on these forms.

I'm sorry, but I lost my train of thought on your question.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I was actually asking you whether there were adequate verification mechanisms for the occupancy statement in connection with the famous 28 days, or whether the owner's statement was enough.

[Richard Halinda]

No, there isn't a mechanism. I don't know whether they're going to check.... When people cross at the border, is Canada border security going to provide that data?

Basically, the return itself doesn't require any proof. It just asks, “Do you agree that you've been here 28 days?”

Every tax return is subject to audit. I don't know if the tax department is going to audit the one or two million of these it's going to get. I don't know. I'd have to defer that to the CRA to see how it's going to deal with that.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I still assume that, if it is noted that the citizen in question has not crossed the border for a minimum of 28 days in the year, but has claimed to have occupied their property for 28 days, it could be concluded that fraud is involved.

[Richard Halinda]

I think you'd be able to follow up on that. Yes. I've told my people to make sure they tell the truth. If you're not here for 28 days, don't use it—period.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you.

Mr. Davidoff, I was reading a little bit about your background. You're an economist, I believe. Correct me if I'm wrong.

You said at one point that, to address the housing crisis, property taxes had to be raised in Vancouver, which you gave as an example in your presentation. I imagine that this city is not an isolated case. What needs to be monitored before your proposal is implemented? Should we consider the size of a city or its vacancy rate so that your recommendation concerning Vancouver could apply to other municipalities? What do we have to watch for as commonalities or differences?

[Dr. Thomas Davidoff]

Thank you for the question.

When thinking about property taxation, two issues come up in terms of where you want to have high property taxes. You don't want to have property-linked taxation. You don't want to have taxation where people can run away from the tax.

In markets where homes just won't get built if taxes are too high but there will be lots of building when taxes are low, that's a place where you should have low property taxes. Of course, in Vancouver and Toronto, we know there are gigantic lines to build homes. The city can't keep up with the permitting and zoning restricts building, so higher property taxes don't really have an adverse effect.

If you're in some rural area, maybe near Niagara but not the desirable location on the water, homes are going to.... Nobody is in a great rush to build homes. A tax might deter construction. Therefore, urban areas where it's hard to build and, of course, where affordability is a problem, that's where you want to focus higher property taxes, offset by lower income taxes.

As for doing it globally, I don't know how much these cottages cost. If you're looking at a few thousand bucks a year, tops, for the overseas residence, that doesn't seem heartbreaking to me.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll turn to our next questioner for six minutes, Mr. Cannings.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Thank you to both of the witnesses here today. I'm going to start with Mr. Davidoff, but first I want to say that I represent an area in the Okanagan Valley and the Kootenays in British Columbia. Like Niagara, we're on the border. We have many visitors every year. We really have a very large tourism component. We both make good wine. I'll say that to Tony at this time.

Where we differ, at least in my experience, is that we don't have this history of American residents moving into cottages in the Okanagan during the summer. When I was younger, many years ago, there were a lot of Washington residents who would come into the Okanagan for tourism. Most of the homes that are owned now on a seasonal basis in my area are, I would say, owned by people from Calgary or Vancouver. They're not cottages. These are very expensive homes.

I used to live in a little town called Naramata. In recent years, the school population in Naramata has gone from 250 kids to 60 kids, because most of the homes in downtown Naramata are not owned by residents. They are owned by people in Vancouver and Calgary, and they're put out to Airbnb.

With all that, I want to ask Mr. Davidoff about the British Columbia examples of the speculation tax. How has that been implemented? It's implemented in specific urban areas. It's not defined by any census thing. It's defined in a regulation that lists those areas.

Could you talk about that speculation tax? What has it accomplished, and how is it implemented?