Last year 6,339 regional homeowners defer property taxes –
March, 2016 – Increased use of the province’s property tax deferral program by thousands of local homeowners results in unintended consequences such as less scrutiny of municipal government costs, says the advocacy group Grumpy Taxpayer$ of Greater Victoria.
In 2015 some 6,339 taxpayers – about equivalent to the number of dwelling units in Fairfield – deferred $22.2-million in property taxes in the 13 jurisdictions of the Capital Regional District (CRD), according to a freedom of information request filed with the B.C. Ministry of Finance.
Since 2010 deferrals has increased by 25 per cent and the dollar value has increased by 35 per cent. With taxes in the Capital region often exceeding inflation by two or three or four hundred per cent, house prices increasing, and the population aging, it’s expected the tax deferral program will only increase in popularity.
The three largest participants in the program last year are Saanich with 2,089 deferrals ($7.4-million), City of Victoria with 1,190 deferrals ($4-million), and Oak Bay with 701 deferrals ($3.5-million), according to the B.C. Ministry of Finance.
“Without doubt the property tax deferral program is an excellent initiative for many seniors,” says Stan Bartlett, Chairperson of Grumpy Taxpayer$ of Greater Victoria, “But there are unintended consequences.”
“Big tax increases are out of sight and out of mind for many homeowners. When the big bill isn’t payable for 10 or 20 years, why bother growling at your councillor or city hall about excessive taxes?”
When seniors and others can defer taxes it gives councils and administrations reason to continue to increase taxes well above inflation year after year, says Bartlett.
Of the three levels of taxation in B.C., only one program allows taxpayers to borrow an amount owed on taxes at a sub-prime rate. Grumpy Taxpayer$ asks these questions: Why is the program necessary? Is the problem the property assessment process? Does it result in a weakening of the accountability structure around local government?
“Tax deferrals may seem like an act of kindness by government, but results in taxpayer apathy and municipalities continued failure not to get costs under control. Some taxpayers are only able to pay their taxes by effectively getting a lien on their property, and passing the burden onto the next generation with exaggerated costs,” says Bartlett.
The unintended consequences of what is a fundamentally a good program are unfortunate – politicians know there will be less backlash against big tax increases. The increased popularity of the deferral program has eliminated some of the checks and balances critical for effective municipal government.
Many taxpayers defer taxes because they are property-rich, but cash-poor seniors who want to stay in their home. Others, want to take advantage of low-interest money that’s available without a means test. The province underwrites the program, a bill paid for by all taxpayers.
You qualify on your principle residence for the program if you are 55 or older, a surviving spouse of any age or a person with disabilities at 0.85 per cent simple interest (non compounding). As well, families with children qualify under a higher interest program if you’re a parent, step-parent or financially supporting a child. Applicants must have and maintain a minimum equity of 25% of the property’s assessed value. A lien is registered against the property and the loan with interest is paid back when it’s sold.
Defer your taxes, B.C. Department of Finance http://www2.gov.bc.ca/gov/