Ontario Government May Extend Power to Municipalities to Charge Land Transfer Tax
The Ontario government is currently consulting with municipalities covering issues like whether they have the tools needed to deliver services effectively and addressing any barriers to that service delivery. Some municipalities have raised concerns regarding the adequacy of existing revenue tools to meet infrastructure needs.
Ontario Real Estate Association’s View
The Ontario Real Estate Association, which represents the interests of the province’s over 60,000 realtors, says the Wynne Government is about to give all other municipalities in the province the same authority as Toronto now has, the right to set up their own municipal land transfer tax and piggyback that on to what the province charges. Toronto real estate currently is subject to such double tax, while purchases in other municipalities are not.
The Association says that the Liberals wrote to the Association during the election campaign saying they had "no plans" to extend the Land Transfer Tax powers to other municipalities such as Markham, Vaughan, Richmond Hill, Pickering, and Ajax.
Pat Verge, the Association’s President, says that Ontario home buyers are already charged a provincial land transfer tax, so if a municipal tax is added, there would essentially be a doubling the tax burden on Ontario families. In Toronto that has doubled the land transfer tax to as much as $15,000 on a home priced at about $450,000. Half of that money goes to the province, half to Toronto. None goes to the home seller.
Comments from the Municipal and Provincial Government
Municipal Affairs Minister Ted McMeekin recently said: “I am not ruling anything out, absolutely not,”. McMeekin said everything is on the table as cash-starved municipalities cast about for ways to raise money as part of consultations being held regarding proposed changes to the Ontario Municipal Act. “They are not specifically asking for any new tools (for raising money), it’s always very generic. Questions arise as to why Toronto has certain revenue tools the rest of us don’t have,” McMeekin added. “I have said whatever revenue tools may . . . be granted, would only be done so on an optional basis . . . but we have made no decision on that at this point,” he further said.
Ontario Finance Minister Charles Souza, when recently questioned on the matter in the House of Commons, replied: “As part of the review of the Municipal Act, we’ve been meeting with municipalities to discuss a variety of issues — issues that include sufficient accountability and transparency, whether municipalities have the powers and tools to deliver those services effectively, and what barriers municipalities face in achieving their financial sustainability,”. Sousa encouraged cities, towns and members of the public to "speak their minds" through the consultation process.
Comments from Other Parties/Associations
Pat Vanini, executive director of the Association of Municipalities of Ontario (AMO) said AMO thinks that Ontario’s municipalities should have the same options that Toronto has had since 2006.
“It’s logical that municipal governments across Ontario should have a consistent set of tools. Municipalities ought to be able to work with their community members as to what, if anything, makes sense in their local context,” she said in a statement.
Ontario is reviewing three key elements of Ontario’s municipal legislative framework: the Municipal Act, the City of Toronto Act, and the Municipal Conflict of Interest Act. The government is required by legislation to review the Municipal Act and City of Toronto Act every five years. The government is reviewing these Acts at the same time, along with the Municipal Conflict of Interest Act. As part of such review, all revenue tools are on the table, including the ability to potentially levy a municipal tax, if so desired. Is such a tax likely? I think it’s quite possible, although it’s far from certain, based on the comments from the respective ministers. I agree that municipal governments across Ontario have a consistent set of taxation tools. That only seems fair, and Toronto should not be given special taxing powers.
The implications of such a municipal tax in the GTA are as follows:
If a tax is levied in the 905 municipalities, it will make it more difficult for buyers to purchase in those markets, because they will have to save up more funds for a down payment. There is also a possibility that any tax may cause potential first time home buyers to stay in Toronto and settle for less house rather than go out to the suburbs, pay the tax and higher closing costs, as well as contend with long commutes. The impacts are difficult to quantify of course, and initially there may in fact be a surge to buy, in order to beat any such tax.
Ram Rajendram is a Toronto Real Estate Broker with Century 21 Harvest Realty Ltd., Brokerage. He sells condos & houses throughout the GTA & assists home & condo buyers with their purchasing needs. He is also a Canadian Chartered Accountant (CA) & holds a Bachelors Degree in Economics from the London School of Economics (LSE)