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Builder hates Toronto's proposed tax

An article by Bob Finnigan is president of the Toronto Building Industry and Land Development Association

A double-whammy is defined as a combination of two unfortunate or negative circumstances or events. Paying the same tax twice, once to the provincial government and once to the local government, would be very unfortunate indeed, particularly when we're talking about a more than $4,000 increase to the price of an average home in the city of Toronto.

Under the City of Toronto Act, which took effect on Jan. 1, the provincial government empowered council to impose new taxes. Knowing the public antipathy to tax increases, Mayor David Miller insists on using the euphemism "revenue tools," but the bottom line for would-be homebuyers is that Toronto is set to become the only jurisdiction in North America to whack homebuyers twice with the same tax.

The city is proposing to mirror the provincial land-transfer tax on all property transactions, which would suck $300 million out of taxpayers' pockets with nothing to show for it whatsoever.

(The city's chief financial officer has said it is quite likely that this tax will be used to shore up the city's projected $575-million shortfall in 2008.)

The Building Industry and Land Development (BILD) Association has two major concerns with the city's proposal, the first relating to housing affordability and the second relating to the issue of sprawl.

On the issue of housing affordability, the average MLS home price currently sits at about $380,000. If you buy that home today, you will pay provincial land transfer tax of $4,200. When Toronto is done with you, you will pay about $8,400. Amortized over the life of a mortgage, the incremental cost will be much higher.

Some commentators have intimated that this home-buying tax would hurt only sellers, choosing to ignore the fact that the land transfer tax is payable as an adjustment on closing that gets passed straight through to the buyer. First-time buyers will be hurt the hardest, of course. You simply cannot take $300 million out of the system and not expect any pain to be felt by individuals or, for that matter, the economy of Toronto.

This tax also runs contrary to recent efforts by the provincial government to direct growth inward and upward, not outward. The Toronto land-transfer tax completely changes the mathematics of housing choice. People will drive across town to buy the supermarket special so anyone who thinks they won't cross regional borders to save $4,000 on their home price is dreaming.

Since this tax will also apply to commercial and industrial lands, the impact becomes a significant factor for businesses considering investing in the city. This tax will undoubtedly make Toronto less competitive and gives business another reason to opt for the 905 area, which is already happening in a big way.

Polling commissioned by our organization and others reveals that the city land-transfer tax is not supported by about 69 per cent of respondents within the 416 and 905 regions. The research also demonstrates that the city should not impose these taxes until it gets its fiscal house in order. New taxes are not the solution, nor are they likely to make our city more livable.

The doubled land-transfer levy would be a blatant tax grab. It will be bad for homebuyers and it will be bad for business.

June 23, 2007 in Real Estate Practices | Permalink


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Posted by: FCI Exchange | Nov 17, 2011 4:10:00 PM

Where would we be if government could not make cash grabs on a whim and profit from a now waning housing boom?

Posted by: Ontario Real Estate | Jun 25, 2007 1:22:54 AM

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