After doing little to stop tax cheats, government is about to beef up West Coast staff
PETER O?NEIL AND GORD HOEKSTRA
The Province
A “bombshell” internal federal government document has triggered a new wave of accusations of inaction in dealing with Vancouver’s housing affordability crisis.
The document, leaked to the South China Morning Post, indicates the Canada Revenue Agency conducted only one successful global audit last year of the so-called “astronaut” millionaire immigrants who buy pricey homes and settle families in Metro Vancouver, but fail to report their worldwide taxable income.
The single overseas audit was one of 339 audits done by the CRA’s Pacific Region that yielded a total of $14.4 million in recovered revenues and $1.3 million in fines.
The document is stamped “protected B” — which indicates the public disclosure of the report could cause “serious injury to an individual, organization or government,” according to Public Works and Government Services Canada.
The Hong Kong newspaper quoted from a slide presentation to B.C. Pacific Region agency staff last month that said the agency is now beefing up its resources to go after tax cheats, especially the top 500 files of greatest concern in the city’s overheated housing market.
The additional 85 full-time staff on the West Coast will target the “astronauts” as well as speculators who “flip” properties to obtain a quick profit, then fail to pay capital gains tax and sometimes don’t pay the goods and services tax.
Some, according to the presentation, seek to avoid the GST by claiming the house is a “principal residence” and therefore exempt.
The quick sale is justified in a variety of ways, according to the slide presentation, including: “Dad tripped over a crack in the sidewalk in front of the house (bad omen).”
CRA spokesman Jeffrey Lansing issued a statement Thursday saying the agency’s efforts are not specifically targeting foreign buyers.
He also said the agency’s focus on domestic tax evasion and real estate flipping is taking precedence over failure to report offshore income because that’s the area “where the risk of non-compliance was highest.”
A Vancouver academic called the report a “bombshell” certain to enrage many British Columbians frustrated that the agency didn’t act sooner given evidence of tax evasion for years.
Postmedia reported last year that a study by University of B.C. geographer Dan Hiebert found some homeowners in tony parts of the west side of Vancouver and Richmond were claiming to have income as low as people struggling to survive in Vancouver’s poor Downtown Eastside.
A study by Vancouver mathematician Jens von Bergmann, formerly of the University of Calgary, published first in the South China Morning Post, had similar findings.
“This is a stunning failure on the part of the CRA,” said Simon Fraser University professor Joshua Gordon, who recently completed a study on the impact of foreign investment in Metro Vancouver’s housing affordability crisis.
“It represents gross negligence in this area, since questionable activity in this area has long been suspected.”
Gordon said the former Conservative government needs to take a considerable degree of blame because it “gutted” the agency’s international audit division as part of its budget-balancing initiative.
In a written statement, the B.C. government said it supports the CRA’s efforts and is already sharing information, but did not respond as to whether it believed the CRA effort should be beefed up even further.
B.C. finance ministry spokesman Jamie Edwardson said Finance Minister Mike de Jong raised the tax-evasion issue last month with Morneau, the federal finance minister.
That helped create a working group of federal, provincial and municipal officials examining this summer how to share more information to prevent further tax evasion in real estate, Edwardson said.
Also in a written statement, Vancouver Mayor Gregor Robertson said he hopes the working group will result in concrete steps to strengthen real estate market oversight and rein in the Vancouver housing market.
The additional staff for the B.C. regional office include 50 income tax auditors, 20 GST auditors, and 15 “workload development officers” to assist them, according to the June presentation.
The slide show says any additional enforcement work “will not address the major concerns” involved in the affordability issue, which it says is driven by broader dynamics relating to the forces of supply and demand.
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