B.C.’s tax on foreign buyers has legal basis, Christy Clark says

Theglobeandmail.com
Sept. 20, 2016
By Mike Hager and Sean Silcoff

B.C.’s Premier says her government’s tax on foreign home buyers has a solid legal foundation, and she is hopeful the courts will dismiss a potential class-action lawsuit filed by a local Chinese woman who is unable to pay the 15-per-cent levy on a townhouse she agreed to buy before the tax was announced.

Christy Clark said on Tuesday that the tax, which was sprung on Metro Vancouver at the start of last month as a tool to cool the superheated housing market, should survive a legal challenge filed in British Columbia Supreme Court on Monday. The claimant is one of the hundreds of people caught up in pending transactions that could fall apart because one party must now pay considerably more money.

“We’re prepared. Our legal advice tells us we’re on pretty solid ground. So we’ll see,” Ms. Clark told The Globe and Mail Tuesday in a wide-ranging sit-down interview. “I mean, there is nothing government can do in the world today, in Canada, that doesn’t garner a lawsuit.”

Ms. Clark’s government has repeatedly refused calls from international residents and the real estate industry to exempt home sales that were pending when the tax was announced at the end of July. She said most voters support the levy - which adds $300,000 for a foreign citizen purchasing a $2-million home and industry insiders say has led the market to its current standstill.

“The idea with the foreign tax is we wanted to put British Columbians first,” Ms. Clark said.

That guiding principle violates more than 30 international treaties in which Canada has committed to treat foreign nationals just as favourably as citizens, according to the lawsuit filed by Jing Li.

Ms. Li immigrated from China in 2013 and moved to Burnaby this year after graduating with a master’s degree from the University of Regina in June.

Ms. Li, a fundraiser at a local non-profit who is not yet a permanent resident, is on the hook for an extra $83,850 in taxes, according to the lawsuit, after she agreed to buy a Langley townhouse in the middle of July - about a week before B.C. announced the levy. She is unable to get the money to pay the extra fee and stands to lose her non-refundable deposit of $56,000 once the terms of the deal complete in the middle of November, the claim states.

Ms. Li’s legal challenge also states that B.C. acted outside its jurisdiction by enacting the tax because Ottawa has exclusive constitutional jurisdiction over foreign affairs, including issues such as foreign trade and aliens.

China is among the 30 countries the lawsuit listed as having international treaties violated by the provincial tax. Other territories and countries include Hong Kong, Philippines, the United States, Mexico, Poland and Russia.

The fact that 33 treaties could be involved “creates a greater level of complexity for the case,” said David Klein, a Vancouver-based class-action lawyer not working on the lawsuit. As well, many of these free-trade agreements have mechanisms to deal with such violations, he added, which a judge might rule constitute a better avenue for Ms. Li’s challenge.

Ms. Li’s lawyer, Luciana Brasil, said it is too early to reveal how her client’s case has legal footing in B.C. Supreme Court, but said that her small firm would not put such a “fair amount of work” into the difficult case if it did not feel it could win. “I don’t expect the province to roll over and cave ... but we’re prepared to take on the fight,” she said.

Prince Edward Island’s strict controls on foreign property ownership do not violate these same treaties because the restrictions apply across the board to anyone who does not reside in the tiny province, Ms. Brasil said.