Free Trade & More Taxes

Canadian Free Trade is on the Horizon 

For more than 22 years, Canada has enjoyed the benefits of a free trade agreement between the three countries that make up North America. This agreement is known as NAFTA. What might come as a surprise however, is that while Canada has been trading freely with the USA and Mexico, it has not established a similar free trade agreement with itself. In other words, provinces and territories across the country don't have an equivalent free trade agreement with each other which, in some instances, can actually make trading goods between provinces harder than with Mexico or the USA.

What About the AIT?

The Agreement on Internal Trade (AIT) came into effect in 1995 and is what currently regulates free trade amongst provinces. Unfortunately, the agreement has proven to be restrictive over the years and has left many provincial leaders calling for a more inclusive agreement that covers a broader range of economic activity. Cue the Canadian Free Trade Agreement.

The What?

Last week, provincial and territorial leaders met in Whitehorse to discuss the creation of a Canadian Free Trade Agreement that will ideally expand the current agreement to include more economic activities and make trading between provinces and territories easier. Surprisingly, the leaders came back from the Yukon with an "agreement-in-principle" and seemed optimistic that an agreement could be reached in the future. However, there was no official hint at what such an agreement may ultimately look like or what types of trading would be made more convenient than with the current AIT. Nevertheless, it looks as though progress was made and that there is a general consensus on creating a Canadian Free Trade Agreement. The Dark Horse Report will continue to follow developments in the coming weeks and will keep you updated.

BC Introduces a Popular Tax?

Every successful politician knows better than to ever utter the word 'tax' unless, of course, it's preceded by the word 'less.' But why then were so many British Columbians happy to hear about a new tax announced on Monday? Well, because the tax likely won't negatively affect them and actually has the potential to provide benefits to many Lower Mainland residents. The new tax, announced yesterday by Provincial Finance Minister Mike de Jong, is a 15% property transfer tax that will only be applied to foreign homebuyers purchasing real estate in the Lower Mainland. De Jong said the legislation is aimed at addressing low vacancy rates and high real estate prices in southern B.C. and that the revenue from the tax would be used to fund housing, rental and support programs.

Not Everyone is Happy

Given that the new tax only applies to foreign homebuyers, the vast majority of BC residents will be unaffected and actually stand to benefit if the tax helps reduce the cost of homes in Metro Vancouver. However, those who stand to lose are the foreign buyers themselves as well as those employed or invested in the real estate industry. The president of the Real Estate Board of Greater Vancouver said the move will create uncertainty in the market and that the government was moving too quickly. Likewise, the BC NDP were also quick to point out flaws in the legislation and claimed the government was unfairly targeting immigrants who wished to purchase a home. Hopefully the province has also thought of this issue and has a plan to address it or else it's likely the bill will have to be amended in the future.

Can the Tax be Avoided?

There will always be those who try to skirt the law to try and save some money, but the government appears to be ready this time around. During his remarks, de Jong made it clear that the amendments "include anti-avoidance rules designed to capture transactions that are structured specifically to avoid the additional tax." Only time will tell if these rules work as well as intended but for now the only sure-fire way of avoiding the new tax is to either A) become a Canadian Citizen or Permanent Resident, or B) buy a home in the next 7 days.

 

Braden McMillian