Chinese Real Estate Deals-When the Whip Comes Down!

You Read it Here First !

Leak reveals secret tax crackdown on foreign-money real estate deals in Vancouver
Classified briefing for CRA auditors outlines strategy to tackle suspected tax cheats who do not report global income or who ‘flip’ homes – but reveals that last year, there was only one successful audit of global income for all of BC

A secret strategy briefing for Canada Revenue Agency auditors has revealed plans to crack down on real estate tax cheats in Vancouver, with 50 auditors being assigned to investigate purchases funded by unreported foreign income.
Presentation notes for the seminar, delivered to auditors on June 2 and leaked to the South China Morning Post, show that only one successful audit of worldwide income was conducted in British Columbia in the past year, in spite of Vancouver’s reputation as a hotspot for immigrant “astronaut families” whose breadwinners often work in mainland China and Hong Kong.

The plans, which come amid a furore over the role of Chinese money in Vancouver’s runaway housing market, were provided by a Canada Revenue Agency employee who attended the June 2 briefing. The briefing is identified as a “protected B” classified document on the cover.

But the employee feared the sweep would prove inadequate. “Sure, they’ve upped the numbers because it’s hitting the papers,” they said. But on average, they estimated, each redeployed income auditor would only be able to conduct 10 to 12 audits per year – about 500 or 600 in total. “This is nothing,” compared to the likely scale of the cheating, they said.

That estimate is in keeping with the briefing text which says the crackdown will “review the top 500 highest risk files within our region”.In Vancouver, house owners made more sitting on their assets than entire population did by actually working last year

The briefing lists four areas being targeted for audit under the CRA’s “real estate projects”, launched in response to “significant media attention”: unreported worldwide income, property “flipping”, under-reporting of capital gains from home sales, and under-reporting of Goods and Services Tax (GST) on sales of new homes.

‘High-end homes, minimal income’
The time-consuming global income audits will tackle “individuals living in high-valued areas in BC who are reporting minimal income not supporting their lifestyle”, as well as those who buy “high-end homes with minimal income being reported.”

The presentation includes a photo of a luxury home supposedly bought for C$5.8million whose owner claimed the “working income tax benefit” for low earners. It also lists the tuition fees of Vancouver private schools.

Property flippers who swiftly resell homes for profit will meanwhile be audited to see if their properties truly qualify for exemption from capital gains tax, granted to people selling their principal residence.
The briefing describes various excuses given by owners who moved out of newly purchased homes, including a negative feng shui report, the “bad omen” of tripping over a crack in the sidewalk, and a painter dying in the home.
Immigration mega-fraud: the rich Chinese immigrants to Canada who don’t really want to live there

It cites the highly publicised case of a well-kept 20-year-old, C$6million mansion that was simply torn down after being bought, prompting community outrage.

Yes, we are getting a response now, but the government has known about this issue for a few years. They held backCRA EMPLOYEE

The briefing does not say the owners of this home, or the $5.8 million home, are tax cheats and nor does the SCMP suggest so.

The CRA employee said the briefing, which was streamed online, was delivered by CRA’s Pacific region business intelligence director, Mal Gill.
Gill declined to discuss the briefing. “I cannot confirm anything to you,” he said, referring the SCMP to a CRA communications manager.

However, she said real estate transactions in Toronto have been the subject of greater scrutiny, for some years. “More recently, the CRA has been actively monitoring and auditing real estate transactions in British Columbia,” she said.
“For the year ending March 31, 2016, the CRA completed 2,203 files [in BC and Ontario] related to real estate,” she said.
In addition to the 50 redeployed income auditors, the leaked briefing says CRA is assigning 20 GST auditors and 15 other staff to the real estate project in BC.

The CRA source said they leaked the material 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. Yes, we are getting a response now, but the government has known about this issue for a few years. They held back.”

The employee said they were surprised to discover that only one successful audit of global income had been conducted in BC in the year to March 31. “That’s the ludicrousness of this. I was shocked when I saw this, and they only got C$27,000 in tax revenue out of it,” they said.

Asked whether this might show a widespread problem with undeclared worldwide income did not exist in BC, the source said: “No, what it shows is that inadequate people and resources have been put to the task. These [tax cheats] are highly sophisticated individuals, with good representation from their lawyers and accountants, and we are sending out our least experienced people to catch them. That’s the problem.”

Source cites CRA’s ‘racism fear’

Census data from 2011 has previously shown that 25,000 households in the City of Vancouver spent more on their housing costs than their entire declared income, with these representing 9.5 per cent of all households.
But far from being impoverished, such households were concentrated in some of the city’s most expensive neighbourhoods, where homes sell for multi-million-dollar prices.

In Bizarro Vancouver, 25,000 households declare less income than they spend on housing alone

The source suggested CRA bureaucrats previously feared being labelled racist if they targeted low-income declarers buying real estate “because the vast majority of these cases, involving high real estate values, involve mainland Chinese”.

The crackdown was not intended for public knowledge, and instead was to satisfy “people from high up” in the CRA and government who wanted to know “what are you guys doing about this…there’s stuff hitting the papers every day”, the source said. Yet the briefing says the crackdown “will not address the major concerns about affordability of real estate”.
The vast majority of these [undeclared global income] cases, involving high real estate values, involve mainland Chinese

The source said there had previously been little done to check whether taxpayers were secretly living and working abroad while supporting a family in Vancouver. “There’s virtually no liaising done with immigration. The common auditor would never check when people are actually coming and going, to check whether they might be going back to China or wherever to work. You can be lied to, to your face: ‘Oh no, I live here [in Canada] full-time’.”

The leaked documents show that in in addition to the single audit on global income in the last fiscal year, CRA in BC conducted 93 successful audits on property flips, 20 on capital gains tax and 225 on under-reported GST. The audits yielded C$14.4 million in new tax, of which C$10million was GST. There was C$1.3 million in fines.

As of April 29, there were 40 audits of global income under way, 205 related to flipping, 34 related to capital gains and 428 related to GST.

The average Vancouver house price now sits around C$1.75million for the metropolitan region, while the Real Estate Board of Greater Vancouver’s “benchmark” price for all residential properties is C$889,100, a 30 per cent increase over the past year. However, incomes remain among the lowest in Canada, making Vancouver one of the world’s most unaffordable cities .

 

To solve the housing crisis I belive we should bring back the head tax for chinese nationals buying property in vancouver. And they should build more housing projects for poor canadians and those on welfare.