Cheating Chinese Jack UP House Prices while paying no Taxes

[msj]

I do not have a problem with foreign ownership so long as it is regulated with tax imposition similar to what Canadians pay. Also, only a certain % of the real estate market should be opened up for foreign investors. My bigger question, how do these investors get mortgages with mediocre revenue streams?

1) To the extent a foreigner owns a property in Canada while being a non resident for tax purposes (or buying a property for ones relative as outlined in my earlier post) leads to similar tax consequences: property transfer tax is paid upon purchase, annual property taxes and water/sewer fees are paid etc.

If the foreigner owns the property and is a non resident then this is equivalent to a Canadian owning a second property (leads to capital gains tax if there is a gain upon sale). The foreigner has more paperwork to deal with when selling by filing T2062 etc etc. Generally this type of thing is captured as the buyer is on the hook for any tax not paid by the foreigner so lawyers have sellers declare their residency status and withhold amounts if such matters are in doubt (one of many reasons to use a lawyer when buying a property).

If the foreigner buys the property for his relative and the relative is a resident of Canada for tax purposes then the principal residence exemption kicks in the same way it would if I gifted money to my niece so she bought a house in her legal name.

So all this nonsense about foreign ownership is looking at the wrong thing: the issue is whether or not the person is actually a resident of Canada for tax purposes which then leads to that person being required to report all worldwide income on a Canadian tax return. The person could be a renter and not paying proper taxes in Canada.

2) I have seen many clients getting huge mortgages based on piddly incomes for many many years. This is no surprise at all. Lenders can find a way to lend especially when the taxpayer is on the hook with the mortgage insurance (not as much of an issue in Vancouver now since the rules changed on this in 2012 capping the insurance to homes worth less than $1 million).

I have seen moms and dads give their kids hundreds of thousands of dollars to buy homes. An early inheritance, I suppose, but I hope the parents end up not needing it as their life expectancy goes up and up.

Regardless, the consequences of low interest rates and people believing real estate only goes up are yet to come.

To blame foreigners rather than low interest rates and government policies (tax subsidies from the principal residence exemption, to RRSP home withdrawal, to the first time home buyers tax credit, to renovation tax credits, to provincial and municipal tax credits and grants) is par for the course.

People can't handle the truth so they avert their gaze from the mirror and... oh, look over there, what's that foreigner doing....

[eyeball]

Really? How does money talk? I mean, given donations are banned beyond a thousand bucks, and illegal from corporations or businesses?

Through the different doors that open up and lead to and from the corridors of power to and from the corridors of influence and wealth. Pay me now, pay me later, pay it forwards sideways or backwards. There's lots of ways to skin that cat.

[August1991]

A story in today's Globe will confirm what many have long suspected, that the ridiculous housing price increases in Vancouver, and almost certainly in Toronto, are due to Chinese investors, few of whom live in the houses, and many of whom cheat and lie about their income to avoid taxes.

Harper promised, the other day, to start looking into who is buying these houses and what impact that's having on the Canadian housing market. I think he should also promise more money to CRA for vigorous investigations and prosecutions of foreigners cheating on taxes.

http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/foreign-investors-avoid-taxes-by-buying-real-estate-in-canada/article26683767/

What's your point, Argus?

As Cybercoma noted above, if foreigners want to buy houses here, that makes current house owners richer.

=====

Was it Duddy Kravitz who said: "Buy land!" Maybe he should have said to buy land in a State with a well organized, civilized government - or have the good fortune to inherit land from grandparents.

Is it any wonder that people want to immigrate to Canada and buy land here.... Canada is a self-fulfilling prophecy.

Edited October 8, 2015 by August1991

[Machjo]

A story in today's Globe will confirm what many have long suspected, that the ridiculous housing price increases in Vancouver, and almost certainly in Toronto, are due to Chinese investors, few of whom live in the houses, and many of whom cheat and lie about their income to avoid taxes.

Harper promised, the other day, to start looking into who is buying these houses and what impact that's having on the Canadian housing market. I think he should also promise more money to CRA for vigorous investigations and prosecutions of foreigners cheating on taxes.

http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/foreign-investors-avoid-taxes-by-buying-real-estate-in-canada/article26683767/

Sure, as long as we respect the Canadian value of the presumption of innocence and not engage in the barbaric cultural practice of the presumption of guilt through racial profiling.

[Machjo]

Nonsense. I'm not suggesting they should ban foreign ownership. But they should certainly have to pay the same taxes as everyone else does.

They do. It's called property taxes.

It's just like a Canadian buying US property.

[Machjo]

Nonsense. I'm not suggesting they should ban foreign ownership. But they should certainly have to pay the same taxes as everyone else does.

They do. It's called property taxes.

It's just like a Canadian buying US property.

You either deflate it slowly, as Flanagan did a few times by changing the requirements for home loans, or you ignore it until it blows and house prices drop like anvils.

I would have raised the requirements even higher.

[Machjo]

Home ownership in Vancouver is frequently a live-in retirement investment, often the only retirement vehicle for seniors. A crackdown in the expensive end of the market might discourage free-loading Asian buyers, however, it will unduly impact the value of local retirement assets.

So if I understand correctly, we want to nail the Chinese but spare all the other ethnic groups.

[Machjo]

That's what I thought too, although it wouldn't in the interests of any gov't to bring house prices crashing down.

One thing they can do is enforce a capital gains tax on houses owned by 'foreigners' which are deemed to be second homes as it's more than likely they own a first home in their homeland. Not sure how owning a first home could be confirmed but it might put the brakes on buying homes as an investment.

But why only on foreignets? If it's a good idea for foreignets, then it's a good idea for Canadians too.

[Machjo]

Now if money laundering is an issue, then let's fight money londering. But again, let's not fight foreign money laundering while giving domestic money laundering a pass.