GST – HERITAGE HOUSING (2005)

 

The City of Victoria offers a tax incentive program to heritage building owners who want to convert their buildings to rental housing. The program was established in 1998 as a way to continue keeping downtown Victoria a vibrant and thriving place, and to encourage the creation of more rental housing, particularly in the downtown core. Historic buildings provide tangible economic, environmental, social and cultural benefits. They contribute to the social cohesion of Canada. Restoring historic places helps the environment by capitalizing on the energy investment in the original structures, preventing unnecessary resource use and reducing the pressure on landfill sites from demolition.

 

The tax incentive program offers a tax exemption that provides coverage on municipal and school taxes for up to a period of 10 years for owners of heritage buildings that have had residential conversions.

 

However, users of the tax incentive program are being subjected to a significant amount of GST by the federal government through “Section 191(3) of the Excise Tax Act”. The imposition of this tax, calculated on the increased value of the land and rehabilitated building in effect, reduces the effectiveness of the city’s tax incentive, particularly in the case of rental housing where the property owner retains ownership of the property.

 

Canada Customs and Revenue Agency includes a calculation of the city’s property tax exemption as a benefit to the owner in the assessment of fair market value. In effect, while the City of Victoria is sacrificing property tax revenue to assist the owners of heritage buildings with the high cost of seismic upgrading, the Government of Canada is collecting a tax on this exemption.

 

Other municipalities across Canada that have similar tax incentives subject to GST include Nanaimo, Kamloops, Kelowna, Vancouver, Edmonton, Winnipeg, Regina, Saskatchewan, Hamilton, London, Charlottetown, Port Hope, and Yellowknife.

 

THE CHAMBER RECOMMENDS

 

That the federal government excludes GST charges on heritage properties that are being converted to rental housing by means of a municipality’s tax incentive program during the time that the program is in effect.