Thank you, Madam Chair and members of the committee, for the opportunity to appear today.
My name is Peter Drobina. I'm a director of federal real estate taxation with Ryan ULC and the vice-chair of the National Apartment Council's tax and incentives committee. I'm appearing on behalf of the NAC, which represents the providers of private sector rental housing in Canada.
My professional background is in GST self-assessment, real estate evaluation and tax disputes. I have spent almost 13 years with the CRA real estate appraisal program, and for the past four years with Ryan ULC I've advised rental developers across Canada on their GST self-assessment requirements, rental rebates, CRA reassessments and tax disputes.
My and NAC's central message is simple. Private rental providers deliver the majority of Canadian rental housing supply and play a vital and central role in meeting our current and future housing needs. To deliver the number of homes that the CMHC has identified as necessary, the industry needs clear, predictable and consistent administrative tax rules so that private capital can continue to flow into new housing.
First, we need more consistency and transparency in GST self-assessment and CRA valuation practices.
Members are seeing significant differences in how CRA appraisers determine fair market value for newly constructed rental buildings, including different legislative interpretations, valuation methods and assumptions in comparable circumstances. These differences are a significant source of reassessment disputes. They can take years to resolve, tie up substantial capital and require significant resources from both the taxpayer and the CRA. Clearer rules, more consistent practices and greater consultation on valuation policy changes are needed to reduce those costs and resolve fair market value GST disputes sooner.
We see a similar issue with the enhanced rental rebate that was announced in September 2023. Uncertainty over CRA's interpretation of when construction begins can lead to materially different outcomes depending on when CRA determines the project started. To avoid that tax cliff, the NAC supports clear and objective eligibility laws and interpretations, including phased-in transition rules where necessary.
These are not simply technical tax issues. Large GST liabilities arise at the worst point in a rental project's lifetime: when construction is complete, capital is fully committed and the building has not yet reached stabilized occupancy. When those liabilities remain in dispute for years, they tie up capital and consumer resources that could otherwise support more rental housing development.
Second, we recognize the need for effective CRA audit and information-gathering powers, but stronger CRA powers should also come with greater transparency and accountability from CRA.
Rental housing providers need clear and timely communication when CRA changes its policies, legislative interpretations or valuation approaches so they can understand and fully comply with the tax legislation. Significant changes should also be developed with appropriate consultation with the rental housing industry and valuation professionals. The goal should be effective enforcement, but also transparent processes, greater consistency and higher-quality standards in CRA assessments.
My third point is on Bill C-31, which proposes to raise the Tax Court's informal procedure thresholds. That may be helpful, but it will have a limited implication to the larger GST disputes common in rental housing. The industry is asking for an applicable informal dispute resolution process with GST fair market value disputes, allowing differences between taxpayer and CRA valuations to be addressed and reasonably resolved earlier without requiring lengthy and costly formal tax dispute proceedings.
Finally, these circumstances and administrative issues need to be considered in the broader context of housing supply in Canada. The NAC is advocating for a modernized MURB-style investment program, a targeted capital gains deferral program for reinvestment in rental housing and more predictable CMHC financing programs. These measures are intended to improve project feasibility and keep private capital flowing into new rental supply.
I would leave the committee with four practical asks. First, improve transparency and consistency in CRA's GST administration and valuation practices. Second, establish clear and objective eligibility rules for rental housing rebates, with appropriate transition or phase-in measures. Third, ensure expended CRA information-gathering powers are accompanied by greater consistency, accountability and quality in CRA audits and reassessments. Fourth, continue to improve federal tax and financing measures so that more private capital can be directed towards new purpose-built rental housing.
The common thread is certainty. Rental housing requires long-term investment and planning. Predictable tax administration reduces risk, supports investment decisions and ultimately enables more housing supply to be delivered.
Thank you, Chair.