Where do the main parties stand on tax issues?

Canada’s federal general election 2021 will take place on September 20.

CFAA does not endorse political parties, since we have to work with whichever party or parties form the government. However, in order to inform CFAA’s members of the main parties’ positions on rental housing issues, CFAA compares their positions.

This e-Newsletter compares the parties’ positions on income tax issues which can affect rental housing providers. A future e-Newsletter will address energy and climate change issues.

Visit https://cfaa-fcapi.org/election-platform-comparison-tax/ to see more details, and CFAA’s positions on the various issues.

Both the Liberals and the NDP promise to waive all GST on the construction of new affordable housing units (but not the provincial portion of the HST). However, it is not clear if either party intends that relief to extend beyond social, community or non-profit housing, to include any new private market rental housing. CFAA would like to see that tax reform apply to new private market rental housing.

The Conservatives promise to allow tax deferral on capital gains from the sale of real estate if the proceeds of sale are reinvested in rental housing, as a means of stimulating more rental housing supply.

CFAA very much agrees with tax deferral on reinvestment in rental housing. See CFAA’s statement on the tax deferral here. In the past, similar policy suggestions have been supported by the Federation of Canadian Municipalities, and the Ontario Non-Profit Housing Association.

The Conservatives promise “never to tax Canadians’ capital gains on the sale of their principal residence.” They accuse the Liberals of contemplating that.

CFAA agrees with not taxing capital gains on principal residences. CFAA’s goal is to reduce the capital gains tax on rental housing, or to defer it.

The NDP promises to raise the capital gains inclusion rate from 50% to 75%.

CFAA is opposed to any increase in the capital gains inclusion rate. If any increase is made, then rental housing should be exempted from the increase, or capital gains should be adjusted for inflation. Absent the partial inclusion rate or an adjustment for inflation, the tax on capital gains would inevitably be in part a tax on capital, which would be ruinous for investment, both generally, and for new housing supply in particular.

The NDP promises to increase the top marginal tax rate from 33% to 35%, and to impose a wealth tax of 1% on wealth of over $10M.

The NDP promises to increase the general federal corporate tax rate by 3 per cent to 2010 levels, and to introduce a temporary COVID-19 excess profit tax that puts an additional 15% tax on large corporate windfall profits during the pandemic.

Both the NDP and the Liberals promise to review the tax treatment of REITs. The Liberals refer to large corporate owners generally and promise to put in place policies to curb excessive profits in this area, while protecting small independent landlords.

CFAA prefers lower taxes to higher taxes.

Investors who own REIT units pay their full fair share of taxes by paying tax on REIT payouts at their marginal personal tax rate. That is usually higher than the general corporate tax rate.

Investors in corporations pay their full fair share of taxes by paying tax on corporate dividends at their marginal personal tax rate (with a credit for taxes already paid by the corporation, through the dividend tax credit).

None of the parties has promised to address the treatment of net rental income as passive income, which results in a higher tax burden on rental housing providers than applies to many business people (who earn active business income).

Visit https://cfaa-fcapi.org/election-platform-comparison-tax/ to see more details, and CFAA’s positions on the various issues.

Remember to vote on September 20, or at the advance polls on September 10 to 13.

For information about your riding or place place, visit https://www.elections.ca/home.aspx.