A land transfer tax is essentially a tax on real estate trades. Combined with Ontario's up-to-2.0 % LTT, the additional City of Toronto LTT of up to 2% for single family residential and 1.5% for commercial, will add up to 4.0 % for houses over $400,000, and 3% for commercial properties. Once again, Toronto will hold the dubious distinction of the highest taxed jurisdiction in North America. Ah to go TO.
Many governments earmark land transfer tax revenue for specific projects. Makes me wonder what Toronto is gearing up for.
The real estate community was quick to voice their disapproval. The Real Property Association of Canada (REALpac), which publishes an annual Canadian national property tax survey, believes the new tax is ill-advised for the following reasons:
- The Land Transfer Tax will make the City less competitive for business and increase the exodus of businesses to the 905 Area of the Greater Toronto Area.
- It will again work at cross purposes to the need for intensification, and could cause the export of jobs.
- A land transfer tax disincents capital mobility: whereas properties elsewhere will find the best economic owners over time without such high tax friction.
- Real estate transfer taxes are regressive because the tax burden is higher for low income households. The thresholds set by the Province in the Land Transfer Tax Act and mirrored by the City of Toronto for the lower tax rates are now too low - how many $55,000 houses are there in the City of Toronto? The $55,000 and $250,000 brackets were set in 1985; the $400,000 surtax bracket in 1989, and none of them have been altered since, resulting in severe bracket creep as inflation makes these numbers much easier to hit. Indeed, the top level tax bracket isn't much higher than the City of Toronto average house price.
- Real estate Land Transfer Taxes are discriminatory because they are assessed against only one type of asset - real estate - while similar taxes are rarely applied to financial assets such as stocks and bonds. Accordingly, the value of real estate in the City of Toronto is diminished, and people are incented to under invest in their property.
- The additional 2% Land Transfer Tax amounts to a confiscation of value of another 2% of the selling value of real estate for every residential sale transaction in the City of Toronto, a further disincentive to locate in the city.
- The increased closing costs on the transfer of existing residential property is likely to reduce the ability of existing and new home buyers to purchase a home or afford a home if they currently rent. A buyer of a new home or condo in the City of Toronto over $400,000 will now pay approximately 10% in Land Transfer Taxes and GST.
- A real estate Land Transfer Tax is a "pure" tax and not a "user fee" since the City of Toronto plays no part in the transfer tax regime in the Province of Ontario.
It’s up to you and me to make some noise. Take action!
