New York Guardians

Douglas Todd: Canada’s public guardians have failed Vancouver

Part one of two

Canada’s public guardians have failed to protect Metro Vancouver residents from forms of rule-bending and law-breaking that have been significant contributors to city housing becoming gravely unaffordable.

Two of the government departments that have let down city dwellers, basically by not doing their jobs, are Immigration Canada and the Canada Revenue Agency.

Although other government departments have also sat on their hands while Metro Vancouver prices have skyrocketed, I’ll focus here on the ways Canada’s immigration and taxation departments have not fulfilled their mandates. And doubts remain they’ll do so in the future.

This is not just my contention. It’s the view of many scholars, including Andy Yan, David Ley, Josh Gordon, Elizabeth Murphy and Tom Davidoff; immigration lawyers such as Samuel Hyman and Richard Kurland; housing activists like Justin Fung and Evelina Xia and some opposition politicians and some journalists.

These observers have recognized, one way or another, that those responsible for immigration and taxation have been encouraging their staff to look the other way while subterfuge has contributed to housing prices becoming ridiculous.


UPDATE: Readers responses to 2-part series on public guardians

Such failures happen when politicians insist too strongly on de-regulation and “cutting red tape” and when they are more committed to making it easier for outside wealth to enter the city’s housing market than they are to protecting constituents.

For the past three decades, politicians in Ottawa and Victoria have been devoted to economic globalization, relentlessly wooing foreign investment, particularly from Asia.

And it’s worked, to the detriment of those hoping to own a home in Vancouver.

National Bank of Canada economists estimate almost $13 billion was spent by Chinese investors on Metro Vancouver real estate in 2015 alone. That represents roughly a third of all home sales by volume. It helped cause price surges.

The critics, in various ways, charge that Canada’s immigration and tax officials have failed to catch many abusers of their systems because of underfunding, understaffing and, sometimes, simply fear.

How did these two departments let down the residents of Metro?

Immigration Canada

The main dereliction of duty by Immigration Canada has been its refusal, until it was too late, to properly assess the Business Immigrant Program (BIP).

Started in the mid-1980s, the BIP has arguably been the most crucial factor driving up Metro housing prices. UBC geographer David Ley estimates it has brought more than 400,000 well-off immigrants to Metro.

The first problem with the BIP, say Ley and others, is that it had extremely low standards.

It began by requiring an immigrant entrepreneur to invest only $150,000 in a business and hire one Canadian. The U.S., at the same time, was demanding business immigrants invest at least four times more money and hire at least 10 Americans.

One of the few high-level government officials to sound a warning about BIP applicants, whose first choice is to pour money into “safe” real estate, was David Mulroney, Canada’s former ambassador to China.

Asia-Pacific-trade boosters like Yuen Pau Woo, recently named a senator, have long said Canada should do everything it can to attract rich immigrants, calling them “the best and brightest.”

But Mulroney counters that liberally handing out passports “devalues the importance of Canadian citizenship.” And Justin Fung, with HALT (Housing Action for Local Taxpayers), concurs: “We’re practically giving away passports for free, and little benefit.”

In the meantime, Immigration Canada officials have not properly monitored the BIP. Their lax approach went on for decades as wealthy trans-nationals avoided being tested for compliance with even the BIP’s low standards.

It turned out BIP migrants as a group paid the lowest levels of taxes in Canada. A forensic auditor for the World Bank ended up called Canada’s BIP “a massive sham.”

The Conservatives finally killed it in 2014, which Fung called “years too late.”

Fung also worries a form of the BIP lives on in Quebec’s stand-alone immigrant-investor plan, which each year brings thousands more moneyed arrivals to Vancouver.

In addition, the federal Liberals are considering reviving a pilot program similar to the BIP.

Canada Revenue Agency

It gets worse.

While Canadian passports were being sold at bargain-basement prices, the Canada Revenue Agency has been ignoring another red flag — that many BIP newcomers and other owners of Metro mansions have been reporting strangely low incomes.

Even though the tax department had been warned, the politicians responsible did not want to face the reality that thousands of BIP investors and others were hiding most of their assets, which should have been taxed.

Officials have not wanted to admit to the widespread phenomenon of “astronaut” fathers who leave wives and student children in expensive homes in Metro to return to their homelands to do business — without declaring their offshore assets to Canadian tax officials.

An early attempt to bring in a national law requiring residents of Canada to disclose their foreign assets was opposed and not only by centre-right politicians, says Ley. B.C.’s centre-left NDP government of the 1990s also expressed concern such a law would be “culturally insensitive” and decrease B.C.’s attractiveness as a place for migrants to invest.

And even when a national foreign-assets disclosure tax law was finally brought into effect, it has often gone unenforced.

In the midst of Vancouver’s escalating housing crisis, in 2014, former Conservative prime minister Stephen Harper chopped 262 experienced tax auditors.

One of the first people to publicly expose ongoing tax avoidance by the trans-national elite was former Richmond Mayor Greg Halsey-Brandt.

In 2015 Halsey-Brandt directed Postmedia to data showing residents of one of Richmond’s most expensive neighbourhoods, where most of the population is foreign-born, were reporting poverty-level incomes — and thus putting themselves in position to pay virtually no taxes.

Another revelation came in the fall of 2015 when statistician Jens von Bergmann and UBC geographer Dan Hiebert independently unveiled census statistics showing high portions of mansion owners in ritzy Vancouver neighbourhoods were declaring almost no income.

The figures from von Bergmann and Hiebert showed several neighbourhoods, in which houses were selling in the $5-million to $7-million range, that were generally populated by immigrants, particularly ethnic Chinese.

In 2016, South China Morning Post journalist Ian Young broke open the tax department’s failures. The Hong-Kong-based newspaper revealed Canada Revenue Agency officials had been aware for decades of such tax-avoidance schemes and had ignored them.

CRA officials had admitted, in internal documents, they were not willing to devote auditors to catching these “highly sophisticated” tax-avoiding schemes by Metro Vancouver mansion owners and others.

‘They were scared,” the source said, “of being labelled racist.’”

In addition, a common real-estate scam has gone largely undetected as a direct result of the failure of Canada’s tax and immigration departments to share their information.

Because of the absence of cooperation, many Metro house owners have been avoiding paying capital gains taxes. They have been falsely claiming they are residents of Canada for tax and immigration purposes when they are actually mostly living outside the country and not disclosing their foreign income.

Unfortunately, it turns out that Canada’s immigration and tax departments have not been the only ones turning a blind eye to such unfairness and cheating in Vancouver’s exploding housing market.

Other culprits have been Ottawa’s anti-money-laundering arm, Fintrac, and B.C.’s politicians responsible for the powerful real-estate sector.

I look at these two in next Saturday’s column.

My simple hope is to show that Canadian and B.C. politicians must, at the minimum, enforce their own laws and standards.

Otherwise they’re not representing their constituents. And public trust is gone.

Go here for Part 2

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