The province’s new speculation tax could cost West Kelowna property owners an additional $10.3 million in taxes says a staff report to be presented to council Tuesday.
The report, by chief administrative officer Jim Zaffino, says not only will the tax directly affect property owners, it could also have a tremendous economic impact on the city by slowing development, reducing property values, result in the loss of tourism revenue, cost jobs, slow the city’s economy and create an uneven playing field when it comes to West Kelowna and other area municipalities–with the exception of Kelowna which is also subject to the tax.
“The intended purpose of this tax is to reduce or eliminate speculation, which in turn will control and ultimately reduce prices and make housing affordable,” writes Zaffino. “This tax was implemented without consultation with West Kelowna council or City of West Kelowna staff.”
As a result, he writes, it will have a number of adverse consequences and do little to stop property speculation.
“If purchasers intend to flip the property in a short period, it would be to make a quick profit. As they would only be responsible for the new tax within that short period, the tax would probably be included in the sale price and do little to deter speculators,” says Zaffino.
And it could cost all West Kelowna taxpayers as well, he adds.
“A financial consequence is that the tax will transfer funds from the private sector to the government. In some cases, it will require investors to sell their property as they will not be able to afford the tax, and probably need to sell at a loss.”
The report says the announcement of the tax has caused a great deal of uncertainty and concern in the community, and the city has heard plenty of criticism
The tax has potential to negatively impact the City of West Kelowna’s Development Cost Charge revenue, tax income and economy says the report.
It includes several letters from city property owners opposed to the tax, which only applies to West Kelowna, Kelowna, municipalities in Metro Vancouver, the Fraser Valley as well as in the Victoria and Nanaimo regions on Vancouver Island.
Zaffino cited a number of examples of people who would be affected by the tax in both Kelowna and West Kelowna, including a Red Deer, Alberta, couple who built a second home in the South Bay Landing area of Kelowna in 2006.
He said their property was assessed at just under $2 million before the B.C. real estate crash in 2008. After that, the property never reached the same value again.
“They are not speculators and believe it is unfair that they would be subjected to a speculation tax,” says Zaffino.
“They visit their property up to 10 times a year, support the local community and feel connected to the community in Kelowna just as they do to their community in Red Deer, Alberta. They are not willing to pay an additional $36,000 per year to live for up to 80 days in Kelowna.”
He said the couple plan to put their home up for sale if there are not significant changes made to the current speculation tax. They are also shocked that the tax is retroactive, as this does not even let owners have the opportunity of making a decision to buy a property with the knowledge of the tax they would have to pay.”
West Kelowna asked the public to comment on the tax prior to Zaffino writing his report. The report will be presented to council at its regular Tuesday afternoon council meeting.
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