Just like the Leafs’ 5-1 loss to the Ottawa Senators last night, we should all say, with respect to the new land transfer tax in Toronto, “We totally saw that coming”…

It’s been a little more than two weeks since City Councillors voted to change the realty tax landscape, but how exactly will the new new taxes be implemented?

DOUBLE THE TAX!

Yes, we now pay double the taxes when we purchase and transfer ownership of residential real estate in Toronto.  But we already knew that.

How much tax is it?  How is it calculated?

Well, the City of Toronto didn’t copy the EXACT calculations from the Ontario government.  For all those that love numbers, here you go:

Ontario Land Transfer Tax:
.5% of $0 – $55,000
1.0% of $55,001 – $250,000
1.5% of $250,001 – $400,000
2.0% of $400,001 or more

Toronto Land Transfer Tax:
.5% of $0 – $55,000
1.0% of $55,000 – $400,000
2.0% of $400,001 or more

Okay, so we know how the taxes are calculated, but what about the fine print?

Here is my favorite part:

“Where the net revenue after transaction fees would result in revenue to the City of less than $2.00, the purchase would be exempt from the Toronto Land Transfer Tax.”

WOW-WOW-WE-WA!

Oh thank you, sweet government, for exempting me from this tax when I sell my property valued at $400 or less.  Because, we all know that $400 buys you so much in Toronto!

So if the revenue to the city is $2.50, the city is going to chase the buyer for the cheque in full?

That sure is an efficient use of city resources!

But my real problem, and my real source of sarcasm for this “well run” new system of taxation, is with respect to the first time homebuyers exemption.

First of all, it’s not an exemption, it’s a rebate.  This means that buyers are NOT exempt from paying, but rather they’ll pay the tax in full, and then apply for a reimbursement.  And we all know how easy, and how little red tape is involved in getting money from any level of government!

So what is the rule regarding “first time buyers”?  Well, the exemption (rebate) is for buyers of houses valued at $400,000 or less.  So in the event that a first time buyer purchases a house valued at $600,000, they would pay the tax only on the portion valued at $400,000 to $600,000 according to the calculations above.

But here’s my concern: What is the definition of a “first time buyer?”  The government would have us assume that they are thinking of first-time purchases anywhere in the WORLD!  But I laugh, outloud, at our government’s optimistic approach to this, and their idea that people will play by the rules.

Imagine a new Canadian who has just immigrated from Kazakhstan and subsequently purchases a small house in East York for $379,000.  This person would be exempt under the new land transfer tax rules if this was their first property.  Well, what if this person owned ten different properties back home in Kazakhstan, or even just one?  Who in their right mind would come forward and admit this to our city government?

And what measures will the City of Toronto take to ensure this “honor system” approach works?  Will they employ a full-time investigator in Kazakhstan to monitor all purchasing activities?

While it wouldn’t be the first time I’ve called the government “naive,” I think that their approach to this first time buyers idea is opening the floodgates to all kinds of problems.  Forget Kazakhstan for a moment, what if somebody owned property in Calgary?  How is the government going to find out?  How long will they investigate each claim for a rebate to ensure the buyer has never owned property before?

In the end, I suppose it could be argued that the ball is in the government’s court since the exemption is in the form of a rebate, and nobody gets paid until the government says so.

But I just find it comical that the City Councillors were arguing so hard and fast to bring this new tax in, and they really weren’t prepared for the consequences.

Well, it’s not like the government to get in over their head, is it?

Have their house out of order?

Speak out of turn?

Be uninformed on matters which they profess to know all about?

No…..couldn’t be….