GST cut one step for housing
CREA submission goes to Finance Minister
Federal Finance Minister Jim Flaherty has been told the Conservative proposal to reduce the GST by one per cent in the next budget is only one step the government can take to help real estate in Canada. “Reducing the GST will have the effect of reducing the costs associated with buying, selling, or renovating a home. It will help address the issue of the affordability of housing in Canada” CREA's External Relations Director Jim Brennan told the Finance Minister.
CREA was one of a dozen national associations invited to meet the Finance Minister and Parliamentary Secretary Diane Ablonczy April 12 th in Ottawa. The meeting was organized so the groups could recommend ways to implement the government's five priorities, and identify areas where the government can spend less or deliver programs in a more efficient and effective way.
The Finance Minister is expected to table his first budget in the House of Commons by mid-May. CREA prepared an updated written submission for the meeting to reflect Conservative budget and policy priorities. It's available by clicking here.
“There is also an industry-specific issue involving the GST, and we would urge you to review it in preparation of your budget” Jim Brennan added. “That is the need to bring the GST new housing rebate in line with the actual housing market. Simply stated, the current GST rebate housing price thresholds are too low and do not reflect current housing markets. The GST new housing rebate has not been adjusted since the GST was introduced.”
The same lack of attention has impacted some of the effectiveness of the Home Buyers' Plan, the CREA submission says. “When the Conservative government created this program in 1991, the withdrawal ceilings were set at $20,000. They have not been adjusted since to either keep pace with inflation or reflect the realities of the housing market. We recommend that the maximum individual limit be raised to $25,000 immediately and adjusted for inflation thereafter.”
The CREA submission also says the Conservative government needs a formal federal housing policy framework that addresses five priorities, including homelessness, transformative change for aboriginal housing, better use of existing housing stock, new options for home ownership among low income earners, and tax and regulatory changes to address contemporary issues such as secondary suites.
In his presentation, CREA's External Relations Director also drew the Finance Minister's attention to the issue of deductibility and other expenses. “We remain concerned that Finance officials may persist in moving forward with steps to limit the deductibility of interest and other expenses by way of a Reasonable Expectation of Profit, or Net Income Purpose test.”
“As we indicated in a letter last fall, efforts to curb this legitimate activity by the tax policy department are an unfortunate attempt to undo practices that were deemed legitimate by the Supreme Court of Canada. We view the Finance Department initiatives as incompatible with current business practices, particularly among small-scale investors in real property.”
Federal Finance Minister Finance James Flaherty has also launched an online consultation process on the Finance Canada Web site to give Canadians an opportunity to provide their views to the federal government during the pre-budget consultation period. The deadline to do so is April 19, 2006. Further information of the consultation process is available here. (CREA 12/04/2006)
[Click here to view the CREA Pre-Budget Submission]
The Schacter Team - Your Langley Real Estate Experts.