FP Quotes ‘Insider’ Who Claims “Systemic Tax Fraud” By Condo Assignment Flippers

“The condo bubbles in Toronto and Vancouver are caused by foreign speculation and are making housing unaffordable and creating financial risk for the country in terms of government-insured mortgages. But there’s another issue of vital concern to taxpayers.
There are three times more condo high-rises being built in Toronto than in New York City and seven times’ more than in Chicago. This boom is not the market at work, but is manipulation by “hot money” from abroad.
“I have come across something that I find astonishing, and which amounts to systemic tax fraud by investors, mostly foreign, on a massive scale,” wrote an investor involved in the industry.”

“Condo brokers tell me I can flip my assignment and pay no tax and there is no paper trail. They say we do it all day long,” said the investor who asked to remain anonymous.
Under CRA rules, foreigners making Canadian-sourced income are fully taxable by the federal and provincial governments. In Ontario or BC, the total tax bill would be 46% or $46,000 in tax for $100,000 profit.
The unpaid taxes could be staggering, said a real estate agent. In Toronto, 20,000 condo units have been sold each year for the past five years. Let’s assume one-quarter were sold to foreign speculators who flipped the assignment and made $100,000 profit without paying taxes. Their Canadian-sourced income would total $500 million a year, and they would owe 46% of that in taxes or $230 million.
– from ‘Taxpayers also victims of ‘hot money’ behind Canada’s condo bubbles’, Diane Francis, Financial Post, 4 May 2012

26 responses to “FP Quotes ‘Insider’ Who Claims “Systemic Tax Fraud” By Condo Assignment Flippers

  1. do you think this is why it’s difficult to track foreign purchasing? This is by design since the “investor” wants to avoid any and all taxes.

  2. corruption is rife at the apex of a bubble

  3. Yep. And believe it or not, some of these assignments or pre-construction sales are booked on MLS and included in sales figures—boosting the average price. Like this condo sold for $502,900 http://i48.tinypic.com/2eb4eh3.png only it won’t be ready until 2015 http://blog.buzzbuzzhome.com/2012/01/210-simcoe-seals-the-deal-with-special-deposit-structure-no-wonder-its-already-over-80-per-cent-sold.html

    The market downturn is worse then it appears.

    • From the article you linked: “How long will the remaining suites last? We’re not into making predictions (leave that to Miss Cleo and Paul Krugman, we always say) but we can tell you that this project has enjoyed some serious success thus far.”

      Love the confounding of hucksterism with vague nations of economic prediction.

  4. “The condo bubbles in Toronto and Vancouver are caused by foreign speculation”

    Well, that’s a big, unproven premise.

  5. How many F35s can you buy for $230m?

  6. It’s unproven, because there are no statistics, and there are no statistics because interested parties’ financial benefits are endangered by the truth being known.

    • bo knows conspiracies

      • chubster knows sh*t. Statistics Canada tracks the flows of funds down to a black fly’s fart… You don’t think they would track this type of information if they wanted to? Don’t you find it interesting that real estate buyers don’t have to reveal their residency status or citizenship?
        If you want to open an investment account to buy stocks you have to provide government issued ID and a declaration you won’t use the account to fund terrorism or money laundering. Why the difference in treatment?

      • an innocent comment, bo … what’s your pt though, that there’s corruption in govt – here, there, everywhere? … what i know … canada is one of the last places on earth where you can get easy credit to speculate in RE … no surprise people might find ways to do that

      • The corruption is in the cozy relationship between RE and gov. Left to itself governments gravitate toward more oversight. If they are lax it’s become someone is influencing them to be lax. That would be business interests in this case. That makes the corruption a group effort. But always look at who is bringing the $. And realize that government could always generate their own (say, through taxation of foreigners) so this is money flowing in an individually corrupting manner.

        Kerbing government corruption means making government resistant to business interests. It takes two to tango.

      • Yeah, “cozy” is a better description than “corrupt”.
        In the case of Vancouver RE, vested interests in government, industry, institutions, etc, have all facilitated the bubble out of self interest: we wouldn’t really call it “corruption”. That includes people in government not really looking too hard at things that they don’t really have to look at.
        The vast majority of what has happened has been completely legal.
        Broad spec manias are so powerful they co-opt everybody in the system.

      • big easy + big cozy + big nosy = big mosey ? … maybe … wonder if there’s a nice chilean or colombian town at the foot of some mountains and the mouth of a river … driving north toward the sun though … that might be as weird as living on the other coast … yeesh

  7. ladies … nice cdn export … super sweet technique – could have done without the rainstick though … check out the bio … i’d be tempted to switch teams

    • maravilloso … thanks señor chubster … I would like to dedicate this song to señora Diane Francis.

    • very nice… but why somebody washing dishes in the background?
      (i think you meant ‘rainshtick’, no?)

    • @v. yeah, it’s not all good but there is a pure quality that comes through in the composition and the technique. shtick-ish promo materials but i caught a few vids of him on the web … seems very straight up … worth watching as craft matures, imo.

  8. Diane Francis has written so many xenophobic articles over the years (I think at least all the way back to the 90’s). Sadly, there is a market for this. Remember: she writes opinion pieces and not fact-checked news articles.

    • Well it certainly seems a great method by which, if common, the government can rein in some speculative excesses and save Canadians from themselves, not to mention some healthy revenues should some unreported hanky-panky be going on.

      What’s not to like? Foreign bugbears avoiding taxes, local developers going along for the ride, too bad it’s done at just the time when popular sentiment is turning decidedly sour on speculation. What better way to look to be “doing something” than release the hounds on such obvious targets?

      There are people in CRA who get out of bed in the morning for this.

      • oh damn you and your socialist optimisms 🙂 yes, yes, yes … do all that … but please don’t feed the beast anymore donuts … it’s getting pretty porky looking and needs proper diet and exercise … or else, it might have a multiple MI someday … check around the 1st world
        ps. hanky-panky, bugbears, release the hounds – sounds foreign … and corrupt! 🙂

  9. I’ve said it before, we know the boom will be over when they find a reason to press charges against Bob Rennie and Cam Good. Facilitating tax evasion will likely be the root of the eventual attack. When it comes to Cam Good, “arrogance cometh before the fall”.

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