TORONTO, June 25 /CNW/ - Today, Toronto's Executive Committee of City
Council is considering implementing a land transfer tax that would make
Toronto another high tax leader.
A land transfer tax is essentially a tax on real estate trades. Combined
with Ontario's up-to-2.0 % Land Transfer Tax, the additional City of Toronto
Land Transfer Tax 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, and make this City, once again, the highest taxed
jurisdiction in North America. However, this taxing honour will be this time
in a second category - Land Transfer Tax. "Toronto is already the highest
taxed jurisdiction in North America for commercial property taxes, as far as
we are aware," said Michael Brooks, Executive Director of the Real Property
Association of Canada (REALpac), which publishes an annual Canadian national
property tax survey. The City of Toronto has pledged to reduce commercial
property taxes over a 15 year period.
Other jurisdictions in North America have far lower averages for a state
or province-level land transfer tax - generally less than 1%. Florida is only
7/10ths of 1%, Chicago 3/4ths of 1%, and Boston less than half of 1%. Across
the border, Erie County in New York State is doing the opposite: eliminating
their local land transfer tax. Many governments earmark land transfer tax
revenue for specific projects.
The highest rates in the U.S. states include Delaware at up to 2%
(combined state and local), Florida (combined state and local up to 1.3%), and
Washington State at up to 1.28%, but then it drops off rapidly. Even New York
City's Land Transfer Tax maxes out at 2.65%.
REALpac believes that a new Land Transfer Tax on City of Toronto
properties 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
- 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
- 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.
Arguably, the Province's land transfer taxes are already too high
compared to the North American average and the efficiencies that the Teranet
system has brought to land registration operations. REALpac urges the Province
to reconsider the delegation of taxing powers which has resulted in this tax.
"New taxes of this magnitude are not a long-term solution for the City,
and send a negative message. Most other large cities in North America are able
to function off the property tax base, albeit with a different transfer
payment regime in the case of some US cities," added Brooks.
REALpac urges the City of Toronto to reconsider the implementation of
About the Real Property Association of Canada
REALpac is Canada's premier industry association for investment real
property leaders. REALpac's mission is to bring together the country's real
property investment leaders to collectively influence public policy, to
educate government and the public, and to ensure stable and beneficial real
estate capital and property markets in Canada.
REALpac members currently own in excess of CDN $150 Billion in real
estate assets located in the major centres across Canada and include real
estate investment trusts, publicly traded and large private companies, banks,
brokerages, crown corporations, investment dealers, life companies, and
pension funds. Visit us at www.realpac.ca.
For further information:
For further information: Michael Brooks, Executive Director, REALpac,
(416) 642-2700, x.225; or Chris Conway, Director, Government Relations, (416)