Realtors warn that a new municipal land transfer tax may be coming to Ontario

Thursday, November 19, 2015

by BETTER FARMING STAFF

An Ontario real estate organization warns that property buyers, including those who buy farmland, might have to dig deeper into their pockets if a proposal to give new revenue-generating tools to the province’s municipalities comes into play.

Pat Verge, president of the Ontario Real Estate Association and an Ottawa realtor, says members of her organization became concerned when they learned that the provincial government was considering extending the taxing authority it granted Toronto in 2006 to all municipalities. The proposal calls for the related section in the City of Toronto Act to be added to the Municipal Act which is currently undergoing a regular five-year review.

“We were told in the (2014 provincial) election promises they weren’t going to allow it,” Verge says Wednesday in a telephone interview. “And then we got wind late summer from (Ottawa-Orleans MPP Phil McNeeley)’s office that yes, they were going to give it as an option for the municipalities to use as a tax collection tool. And we went ‘what’?”

According to a 2007 analysis by two Toronto lawyers, the addition to the Toronto Act allows the city to introduce sales taxes on products such as alcoholic beverages, tobacco and entertainment as well as directly on tax motor vehicle ownership, driver’s licensing, parking, billboards, road tolls, and ominously, real estate transfers.

The tax in Toronto is on top of the provincial land transfer tax that all property buyers must pay. (Farmland changing hands is exempt if the operation is being passed into the hands of relatives.) Provincial tax rates reach 1.5 per cent for non-residential properties with a purchase price of more than $250,000 and two per cent for properties with a residence that cost more than $400,000. The Toronto rates are roughly similar, resulting in buyers having to pay double the land transfer taxes paid elsewhere in the province.

“Why would you penalize buyers?” asks Verge, who cites the tax as a factor in the city’s current housing shortage that is driving up property prices. The double tax discourages people from moving, she explains. “We figure that between 2008 and 2013 in Toronto, we lost 15,000 jobs because of this.”

But the executive director of the Association of Municipalities of Ontario says the likelihood is slim that rural municipalities will brandish the enhanced revenue-generating authority that the provincial government is considering.

Most of rural Ontario is not highly populated, says Pat Vanini. “You need to have a certain (population) volume to create efficiency in administration” of the tools, she explains.

Vanini says that when initially empowered, Toronto attempted “a number of things and then they actually got rid of a few things that they had started.” Toronto does use its enhanced authority to levy a municipal land transfer tax.
 
Mike Turner, Chatham-Kent chief financial officer and treasurer, says the enhanced authority would be of more use to larger municipalities with high growth than smaller rural ones such as Chatham-Kent where property turnover rates — and prices — are much lower.

 “How does that (tax) play into the selling of property, and does it hurt us to be able to sell a property or a farm or anything else if you’re incurring an additional cost for land transfer tax that might give revenues to a municipality,” he says. It’s for this reason — to avoid stifling development — that development charges that are kept lower in Chatham-Kent than in higher growth areas, he says by way of example.

Turner acknowledges the idea of an annual road tax — something the enhanced authority would allow — might be possible in theory but he’s skeptical the revenue generated would be worth the administrative expense and logistical headaches. “How do you administer it?” he asks. “Who are you taxing?”  Moreover, funding for road repairs and maintenance is already generated through property tax.

“If it hurts your growth, if it hurts people coming to your region, any of those types of things, those are all things you want to avoid,” he says. “You have to weigh that against what your additional revenue might be.”

The idea of imposing tolls to help pay for roads — a concept already put to use in the traffic dense GTA — is equally impractical for rural areas, he says.

Verge says that so far, “thousands and thousands” of letters protesting the extension of the taxation powers have been sent to MPPs via a website the association has designed for the issue. The site features a tool that helps people generate and send the letters.

As well, Steve Clark, MPP Leeds-Grenville has tabled a motion to stop the proposed change. The Legislative Assembly debates the motion on Dec. 3.

“We’re hoping and hoping that we’re going to get enough support to nix this right away,” says Verge. “Canadians have enough debt as it is.” BF
 

UPDATE November 24, 2015 6:52 p.m.:

At their annual meeting in Toronto on Tuesday, Ontario Federation of Agriculture delegates opted to support a resolution calling for the provincial general farm organization to oppose the imposition of a municipal land transfer tax. BF

UPDATE November 24, 2015:

John Innes, Lambton County general manager, finance, facilities and court services, says municipalities have been talking to the province about needing more flexibility on how they raise revenues “because otherwise property taxes are going to continue to go right through the roof and that’s not appropriate.”

The province responded, he says, by initially offering to extend to all municipalities the enhanced powers it gave Toronto to levy taxes such as the land transfer tax. But such a tax “only works if everybody is doing it because then it becomes a level playing field” between municipal jurisdictions.

Moreover, it won’t generate a lot of revenue in an area like Lambton County where “we don’t have a large number of transactions and we’re not a growth area,” he says.

Innes says he doesn’t know of anyone on county council or in the county’s municipalities who wants to bring in another tax like the land transfer tax. He notes that the provincial government also appears to have gone “exceedingly quiet on it as well, which makes me believe that they threw it out to see how people would react to it, that they have largely received a negative response to it and that we will probably not see this happening.”

He describes the proposal as “a half-baked idea with no specifics, and how in the world can you really comment on and talk about the impact of a particular approach when you don’t have all the details?” BF