B.C. court strikes down lawsuit that claimed foreign buyers tax is unconstitutional

A real estate sign is pictured in Vancouver, B.C., on June, 12, 2018. THE CANADIAN PRESS Jonathan Hayward

A B.C. Supreme Court judge has dismissed a class action lawsuit that claimed the province’s foreign buyers tax is unconstitutional and discriminates against Asian immigrants.

In his decision released Friday, Justice Gregory Bowden said the tax — which was introduced by the previous Liberal government — falls under the province’s powers within the constitution to introduce taxes that produce provincial revenue.

The BC Liberals brought in the 15 per cent tax in an effort to cool Metro Vancouver’s housing market, which had become the most expensive in Canada by 2016. In 2018, the current NDP government raised the tax to 20 per cent. The tax is applied to anyone who isn’t a Canadian citizen or permanent resident.

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According to a report from Simon Fraser University economics professor Andy Yan that was submitted into evidence by the province, Metro Vancouver’s housing market was affected by foreign buyers using real estate “as a financial instrument disconnected from its function as housing.”

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Bowden noted other economic experts had accepted that foreign buyers were contributing to the high cost of housing in the region. He also pointed out Metro Vancouver saw the price of a single-family home increase by nearly 40 per cent in the year leading up to the tax, with a similar jump in condo prices.

READ MORE: Class-action lawsuit launched against B.C. foreign home buyers’ tax

But the lawsuit’s representative plaintiff, Jing Li, argued the tax disproportionately targeted and affected Asian buyers, particularly those of Chinese descent who make up a majority of immigrants to Greater Vancouver.

Li, a Chinese national, moved to Canada in 2013 to complete a master’s degree in public administration at the University of Saskatchewan. She later moved to Burnaby before putting an offer on a Langley home listed for $587,895 including GST in July 2016.

Eight days before the law was announced, Li paid a non-refundable deposit of $55,990. The tax then added $83,850 to the purchase price, which Li had to pay or risk forfeiting her deposit.

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Li was seeking to certify the case as a class action lawsuit, which was first proposed in September 2016.

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Her lawyers argued the tax placed an arbitrary disadvantage on non-Canadian and non-permanent residents because it assumes foreign nationals are richer and better able to outbid domestic homebuyers.

READ MORE: B.C. small business owner sues, says $269K bill for foreign buyers tax ‘unfair’

She also argued Chinese immigrants, including those who held Canadian citizenship, were being unfairly perceived as causing Vancouver’s overheated real estate market. In her argument, she said the enactment of the tax sealed those stereotypes in Canadians’ minds.

But Bowden said Li failed to show the tax actually made racial stereotypes and prejudices worse, and that saying they existed or were mentioned around the time of the tax was not enough to support her argument.

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Further, the judge said while a majority of buyers who were subjected to the tax in its first year were from Asian counties and particularly China, it didn’t mean the tax affected Asian buyers “in particular.”

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“There is no burden imposed on buyers from Asian countries that is not imposed on buyers from other countries,” the decision reads.

“Further, buyers from Asian countries have the same opportunity to seek permanent residency status or a provincial nomination so as to be exempt from the Tax.”

READ MORE: How government policies are impacting B.C.’s real estate market for better or worse

Bowden also cited Yan’s report and testimony that indicated “overwhelming support” for the tax among Asians living in Metro Vancouver.

“Professor Yan states that Canadian citizens or permanent residents of Vancouver of Chinese descent are equally impacted by housing unaffordability and equally will benefit from any measures that improve affordability,” the ruling says.

“In this context, it cannot be said that the tax perpetuates an Asian disadvantage.”

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In addition, the judge said Li failed to prove the tax prevents people from immigrating and settling in Metro Vancouver, citing provincial rules that allow buyers to have the tax refunded after proving citizenship.

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During the federal election campaign, Prime Minister Justin Trudeau pledged that a re-elected Liberal government would impose a national one per cent tax on properties owned by non-Canadians and non-residents in an effort to curb foreign speculation in real estate.

The tax would help deter foreigners who wish to speculate in the housing market, which has been a key contributor to a surge in home prices in other Canadian markets in recent years, Trudeau said in September.

—With files from the Canadian Press

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