TORONTO, March 20, 2013 - In light of a proposal to cap the Toronto Land Transfer Tax, being considered by the City of Toronto's Executive Committee today, the Toronto Real Estate Board (TREB) is restating its strong belief that this tax should be phased-out.
"The Toronto Land Transfer Tax should be scrapped, not capped. We are encouraged that the Executive Committee is considering action on the Land Transfer Tax, but, not only is capping not enought to correct the problems that this tax is creating for our City, it could make this bad tax even worse," said Ann Hannah, President of the Toronto Real Estate Board.
In a letter to the Executive Committee, TREB has pointed out that, based on reported details, the proposed capping scheme could create considerable uncertainty for home buyers, if, as proposed, surpluses in Land Transfer Tax revenue are dedicated for reducing the tax in the subsequent year. Under this scenario, home buyers could be artificially enxouraged to delay home purchases, thus interfering with the natural operation of the real estate market. This concern has also been articulated by renowned numicipal finance expert, Enid Slack of the University of Toronto, who has recently quoted by the media as saying "If you want to reduce the land transfer tax, why would you not just reduce the tax rate, and say the tax rates are going down, so there is some certainty for taxpayers going forward? With this method (capping), they're not going to know what the tax rate is next year."
"The best approach is a phased elimination of this tax. The only way to truly solve the problems that this tax is creating for our City is to get rid of it; and with a predictable phase-out strategy, home buyers could make informed decisions and City Council could set a reasonable schedule, which would make market distortions unlikely," said Von Palmer, TREB's Chief Government and Public Affairs Officer.
Research has proven that municipal land transfer taxes have a negative impact on home sales. The C.D. Howe Institute recently released an analysis of the Toronto Land Transfer Tax, which shows that this tax has hurt Toronto's economy by dampening home sales by 16 per cent. This is supported by a recent poll conducted by Ipsos Reid, which found that 77 per cent of GTA residents planning to purchase a home in the next two years are more likely to purchase outside Toronto specifically to avoid paying the Toronto Land Transfer Tax. This poll also found that nearly seven in ten Torontonians, 68 per cent, support plans to eliminate the Toronto Land Transfer Tax.
"Capping equals keeping. That's not good enough for our City and it's not what Torontonians want. The public has repeatedly made it clear that they want the Land Transfer Tax Scrapped," said Palmer.