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Toronto's land transfer tax falls short
Toronto's new land transfer tax isn't quite the solution to the city's budget crisis it was touted to be when Mayor David Miller finally pushed the controversial measure past city council last fall. The city had projected it would collect about $155 million in 2008, already considerably less than the $300 million per year mentioned in the original pitch. But the first five months of the tax actually brought in only $54.8 million.
Since then, the credit crunch, stock market gyrations, recession fears and possible budget deficits in the federal and provincial governments have taken a toll on consumer confidence – and on real estate values.
The official line is that the tax is still on-target for this year, avoiding a huge hole in the budget. But that would require collecting $100 million in just six months, which would seem impossible given the declining market and the fact the typical top sales months are already past.
And so far, no one at city hall is offering projections for next year.
Miller and allies got the transfer tax passed last year after an acrimonious, months-long debate on the grounds it would save taxpayers from a punishing tax hike. They succeeded only after a summer of budget-slashing, followed by compromise.
The tax was originally supposed to mirror the provincial land transfer tax, with rates that would generate $300 million annually. But to ensure council approval last October, the rates were lowered. For example, on a $400,000 home, the provincial tax is $4,475; the city tax only $3,725. Also, first-time buyers qualify for a rebate up to $3,725.
Councillors complain they've been kept in the dark about the tax revenue figures.
Councillor Michael Thompson has asked Miller in writing for details of contingency plans should the land transfer tax fall short, and whether service cuts may be needed to balance the 2009 operating budget. He hopes for an answer by next week's council meeting. "Specifically as it relates to the land transfer tax, I don't think we've been kept up to date on it," Thompson said.
The mayor expects to be able to balance the budget, including a 2 per cent to 4 per cent increase in the property tax to meet inflation, but without imposing big service cuts, said spokesperson Stuart Green.
"The mayor's plan all along is to introduce budgets that are balanced. We were able to do that last year and we should be able to do that this year," Green said.
But Von Palmer, spokesperson for the Toronto Real Estate Board, says the housing market "seems to be in a downward trend." "There's no doubt that the land transfer tax isn't helping," he said yesterday. "It's an upfront cost that people have to pay."
Councillor Paul Ainslie, a member of the budget committee, said officials referred to declining numbers when he recently asked about revenues from the new taxes."That's when they started saying ... it's nowhere near where it was expected to be," Ainslie said.
Other councillors on the budget committee, however, say concerns about a declining real estate market are overblown.
Councillor Adrian Heaps said developers have had no trouble selling out a new subdivision at Warden and St. Clair Aves. Even high-end homes are selling, he said.
Source: Paul Moloney reporting in the Toronto Star.
October 21, 2008 in Toronto Real Estate Taxes | Permalink
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I think this tax is outrageous and I've started a petition on my site.
Posted by: Toronto Condos | Jun 12, 2009 6:50:09 AM
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