The Canada Revenue Agency (CRA) is planning a crackdown on real estate-related tax cheating in Vancouver, according to a report in a Hong Kong newspaper.
The move could put a damper on the city's frenzied real estate market, where many have attributed double-digit house price growth to an influx of illicit foreign money.
A row of a new houses in the Vancouver suburb of Richmond, British Columbia. (Photo: Volodymyr Kyrylyuk/Getty Images)
The South China Morning Post says it has obtained leaked documents from the CRA showing it plans to deploy 50 auditors who will “review the top 500 highest risk files within our region."
“It’s a secret tax crackdown on real estate deals in Vancouver related to foreign money,” Ian Young, the reporter behind the story, told News1130 in Vancouver.
The documents reportedly state the crackdown was launched because of “significant media attention” given to potentially shady dealings involving foreign home buyers in Vancouver.
Media have noted some suspicious transactions in Vancouver amid the city’s real estate frenzy, such as a $31.1-million mansion owned by an individual whose career was listed as “student.”
"I’m pretty disgusted by what’s happening here [in the Vancouver real estate market], and a lack of enforcement has been a part of the problem."
The CRA documents mention a Vancouver home that was sold for $5.8 million and whose owner claims the Working Income Tax Benefit for low-income earners.
No allegations of wrongdoing have been made against these homeowners, but the CRA documents state the agency will scrutinize “individuals living in high-valued areas in B.C. who are reporting minimal income not supporting their lifestyle.”
The crackdown could cast a wide net, looking not only at foreign buyers but local ones as well. On top of unreported income from outside Canada, the auditors will look at income from property “flipping,” under-reporting of capital gains from home sales, and under-reporting of the GST on sales of new homes.
Condo towers in Vancouver's West End. (Photo: Chris Cheadle via Getty Images)
The move comes amid reports that China’s government is cracking down on the illicit outflow of cash from the country. Many observers of the Vancouver market say it’s become a haven for unreported cash from China.
Fund manager David LePoidevin told HuffPost Canada recently he believes that Chinese crackdown is responsible for a slowdown in Vancouver’s real estate market in the past few months.
Data shows sales have dropped by double digits over the past few months, relative to a year ago, while new listings have increased, suggesting at least a temporary slowdown.
The individual who leaked the CRA documents to the South China Morning Post said they did so because “like many people, I’m pretty disgusted by what’s happening here [in the Vancouver real estate market], and a lack of enforcement has been a part of the problem."