VICTORIA: The BC division of the Canadian Taxpayers Federation (CTF) today called on the provincial government to end the practice of allowing the GST to be included in the actual value of assessments for new homes in British Columbia, and thus forcing up the property tax payable. The CTF also released a legal opinion that argues that the inclusion of the GST in the assessment value may be a reason for new homeowners to appeal their assessments.

"The opinion is based on the case of Simon Fraser business professor William Wedley, who successfully appealed the automatic inclusion of the GST in the market value of his home," said CTF BC director Mark Milke. "Well over 100,000 new home buyers in BC over the past decade may have been overcharged thanks to assessors including the GST in the value of a new home - perhaps as many as 11,000 last year alone."

The Canadian Taxpayers Federation has written to Municipal Affairs Minister Jim Doyle to ask that the practice of including GST in market value assessments on new homes be ended. The CTF has also written to Opposition Municipal Affairs critic Ted Nebbeling.

The Federation recommended that property owners who bought new homes in the past year consider appealing their assessments if they think the GST component leads to a higher-than-actual value. The Federation noted though that prior year assessments can no longer be appealed.

Vancouver lawyer John Lakes, in a legal analysis requested by the Federation, argued that it is possible a homeowner could reduce their assessment if they could "establish that the actual value as of July 1, 2000 should not include the GST." The legal brief cautioned though that even though Willam Wedley was successful in his appeal on these grounds, that fact "does not lead to a conclusion that any other taxpayer can automatically succeed in a subsequent appeal." Mr. Lakes possesses 51 years of experience as a lawyer, initially acting for assessors, and since 1955, representing individual taxpayers.

The Canadian Taxpayers Federation cautioned that while purchasers of new homes in the past year may wish to dispute the inclusion of GST in the assessed value of the home, it should be noted that the appeal process can be lengthy and costly. As a more comprehensive solution to ensure all property owners are treated fairly, the CTF has written to the provincial Municipal Affairs minister and to the Opposition Municipal Affairs Critic on the issue.

"Given that the GST, similar to property tax, is a tax on market value, it is questionable that the entire amount of GST should be construed as reflecting market value itself." said Milke. "There is no guarantee that just because a new homeowner will attempt to recoup the GST in a subsequent sale, that that will in fact occur."


Background

In 1994, William and Joan Wedley purchased a new three-bedroom apartment in West Vancouver for $616,822 plus $43,177 in GST and $10,336 in property transfer tax.

Their first property tax assessment in 1995 was calculated at $640,000, or $23,178 above the purchase price. The Assessor first argued that the GST is an integral part of the purchase price. Later that argument changed to one that market value increases because the buyer can recapture GST upon resale. Wedley argued that GST is a tax on value, not part of value. Being specified by law, GST is not negotiated in the marketplace. He also argued that there was no guarantee of recouping the GST and, in any event, it could not be assumed in advance of the first sale.

The Wedleys appealed their 1995 assessment to the Property Assessment Appeal Board and the BC Supreme Court where they were unsuccessful. Rather than rule on the GST issue, the Court said the assessor could consider any factor that affects market value.

The Wedleys then appealed their 1996 and 1997 assessments. After the Board made a decision in favour of the assessor, the Wedleys returned to court, where Madam Justice Levine ruled that the Board's failure to use its discretion was an error in law.

The case then returned to the Board where the Wedleys won. The assessor appealed to the BC Supreme Court where Justice Lowry concluded that the Board was correct in concluding that the GST is neither part of market value nor an automatic amount that can be added as an adjustment factor. In effect, this allowed the Appeal Board decision (in favour of the Wedleys) to stand. The assessment for Wedley's property no longer includes the automatic inclusion of the GST as part of the market value.

What this means for those who bought new homes in 2000: Appeal on property assessments are only allowed for the current taxation year. The recent court decision did not allow the Wedleys to pursue general relief for all property owners. To dispute GST inclusion, property owners must file their appeals by January 31, thought the CTF emphasizes the cost of an appeal could potentially be high.