Canada Revenue Agency has identified nearly $600 million in unpaid taxes on real estate transactions since it began keeping a closer eye on the British Columbia and Ontario real estate markets in 2015, the agency said in a recent report.
However, much of that money has to do with CRA rejecting GST/HST rebates to homebuyers.
Of the $592.6 million in additional taxes the agency identified, roughly half had to do with claims for GST/HST rebates that it said were unjustified. Buyers of new or significantly refurbished properties have to pay GST/HST, but there is a partial rebate available to those buying a principal residence.
But the CRA also found unpaid income taxes on real estate transactions — about $76.8 million in unpaid taxes in B.C., nearly twice as much as the agency found in Ontario ($39.5 million), despite Ontario's considerably larger population.
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"Since 2015, the economic factors in the Greater Toronto Area and the Lower Mainland of British Columbia, such as high-valued markets combined with rapid price increases, have further increased the risk of tax non-compliance," a CRA spokesperson told HuffPost Canada in an email.
The amount of unpaid taxes identified by the agency has been on the rise. The agency found some $102 million more in unpaid taxes during the 2016-2017 period than it did in the year before that, and penalties have been on the rise as well, totalling $43.1 million since 2015.
CRA did not provide numbers on how much of this money owed has been collected.
The agency says its main focus in this area has been on property flipping; unreported GST/HST on the sale of new or refurbished properties; unjustified housing rebate claims; and "questionable sources of funds/worldwide income."
However, the CRA report did not provide data on whether any unpaid taxes were found due to "questionable sources of funds." And the agency's numbers, which look at taxes owed on real estate transactions, provide little insight into some of the more egregious allegations of wrongdoing in Canada's hottest housing markets.
Anti-corruption groups such as Transparency International (TI) have been warning that British Columbia's real estate market in particular is becoming a hotbed of money laundering. They say Canada has deficiencies in its real estate regulations that allow illicit money to flow into the housing market, potentially inflating prices.
As of 2016, the government did not know who actually owned half of Vancouver's 100 priciest homes, a TI report said.
But things are changing in this regard. British Columbia's provincial government announced plans earlier this year to require the "beneficial owner" of a property to be named. In other words, owners of residential real estate will find it much harder to hide behind numbered companies or intermediaries in order to obscure who really owns a property.
And starting this year, Canada will begin sharing tax information with at least 90 countries that have signed on to an initiative from the OECD called the "Common Reporting Standard." Among those countries is China, from which hail many of B.C. and Ontario's foreign buyers of real estate.
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That is a "huge" development, Vancouver immigration lawyer Richard Kurland said.
"It's valuable for Canada because it gives (the country) more access to more personal financial information than ever before from China," Kurland told the Globe and Mail.
But that access is a two-way street, and some civil liberties advocates in Canada have raised privacy concerns about the new program.
"The big concern is that Canada would be unwittingly participating in a star chamber investigation and prosecution of somebody in another jurisdiction, or that Canadians would in essence be thrown under the bus and information would be shared with other jurisdictions that don't have our due process and constitutional protections," said Michael Bryant, executive director of the Canadian Civil Liberties Association (CCLA).
The CCLA criticized the Liberal government for quietly introducing changes to the law in this year's budget that will allow for government agencies to share financial data with other countries.
The Liberals' budget documents said the changes are "vital to the global fight against serious crime and (are) consistent with the government's commitments to address global tax evasion and improve the fairness of the tax system."
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