Audit Reveals Major Problems in BC’s Speculation and Vacancy Tax

While filling out the declaration required for British Columbia’s speculation and vacancy tax, or SVT, is a minor annual annoyance for many homeowners, administering the tax has been a major challenge for the government.

And a new government report says the Finance Ministry has few tools to ensure compliance and isn’t collecting the revenue it should be.

The ministry also has a five-year backlog of files requiring action, according to the “Internal Audit Report on Provincial Taxation Revenues: Speculation and Vacancy Tax” that was quietly posted to the government’s website late last year.

“The cumulative effects of the issues described in this report is that the Ministry is not able to collect significant amounts of SVT owing to the Province,” found the Finance Ministry’s internal audit team.

“A mature tax administration consistently collects its tax revenues,” observed the report. “In the case of SVT, significant collections issues exist, and amounts owing to the Province are not being collected in a timely manner.”

Introduced in 2018, the speculation and vacancy tax was intended to discourage owners who kept homes empty.

At the time the tax could be between 0.5 and two per cent of the property’s value, depending on how the owners used the property, their residency status and where they earned and reported their income.

The provincial government says the tax has worked, crediting it and other measures for helping add more than 20,000 units to Metro Vancouver’s long-term rental market.

In December the province raised the speculation and vacancy tax to three per cent for foreign owners and people who report most of their income outside Canada and to one per cent for Canadian citizens and permanent residents.

The tax applies to 59 communities, mainly urban centres and their suburbs. By March 31 each year residents of those communities are required to make a declaration that will determine whether they have to pay the tax.

That process involves the government mailing out some 1.7 million letters to property owners, the audit report said, no more than 11,000 of whom are estimated to owe the tax. A significant number of people fail to make a declaration or don’t comply with the requirements.

The vast majority of the declarations the government receives require no action, it said, but the volume “creates a significant administrative burden... that has consequences on downstream processes.”

The audit found that as of March 31, 2023, five years after the introduction of the tax, the government had collected $311 million.

It had filed liens of $74 million on properties where payment was overdue. And another $317 million was “pending collection activity, reassessment, or subsequent declarations.”

The amount the government said it was owed was more than it had collected since the tax was introduced in 2018.

And the government was unlikely to collect the debt quickly. The office responsible for collecting the money had a five-year backlog of accounts it hadn’t acted on, the report said.

The easiest way to collect the money for the government is to file a lien on the property — a legal order that prevents it from being sold.

And while liens are the primary tool for collecting the speculation and vacancy tax, it said, in about a third of cases liens could not be applied because the ownership of the property had changed.

Other tools available to the government include notifying the Canada Revenue Agency to freeze money the person might be owed, garnishing wages, issuing a demand notice to the person’s financial institution or seizing their belongings.

The government would likely never see a significant portion of the money it counted as owing, the report said, because it included amounts due from owners who had failed to make a declaration.

When that happens, the government automatically applies the tax at the highest rate, but when the owner makes a declaration it can reduce or eliminate what they owe.

“Write-offs of SVT receivables have been growing since the implementation of the tax,” it said. “In 2023, SVT totalled 30 [per cent] of provincial tax revenue write-offs.”

Put another way, the SVT makes up less than two per cent of the $50 billion the province raises from taxes each year, but it generates 30 per cent of the bad debt.

The problems with the SVT go back to its beginning, the auditors said.

The tax was a challenge for the ministry to design, implement and administer, they said, adding that it was developed quickly and “has unique characteristics compared to other taxes.” The COVID-19 pandemic, which created competing priorities, added to the challenge.

“While the ministry did implement SVT by its legislated implementation date, SVT needs to be administered more effectively to fully realize its objectives and to reduce the administrative burden,” the auditors wrote.

The report suggested the ministry “implement an effective audit and compliance function,” “develop a strategy to effectively collect the tax” and “accelerate investments and integration of data science and tools.”

The authors expected the issues and challenges to persist unless there were changes to the ministry’s processes.

The audit is dated October 2023, but the Internet Archive’s first record of it being publicly available wasn’t until late 2025.

The report said the ministry had an audit and compliance team in place, but the team was unable to demonstrate that what they did was effective. They were not tracking, monitoring or reporting on their work, making it difficult to show how much they had done.

Nor was the planning for auditing adequate or complete, the report said. “With limited risk identification and assessment processes, resources are not allocated in accordance with the greatest risks and across all areas of responsibility.”

They had no process in place to identify fraud risks or to respond to tips that someone was suspected of failing to comply with the tax. “Without a process to prioritize received tips, audit opportunities may be missed,” it said.

Nor were they using technology that was available within the ministry that would allow automated checks for compliance and reduce the amount of manual processing needed.

“Overall, audit and compliance operations are ineffective at preventing and detecting non-compliance,” they found.

The auditors also addressed the likelihood that the government might waste resources trying to collect speculation and vacancy tax debts that people in the end wouldn’t actually owe.

“SVT is unique, as a property owner may be assessed a tax balance but can subsequently declare to eliminate or reduce the amount. This creates administrative inefficiency as the Ministry may dedicate resources to collect the undeclared receivables, which may be subsequently eliminated by declarations.”

At the time of the report there was a backlog of 18,511 accounts waiting for action, a volume that would take collectors five years to complete.

“Overall, a strategy to mature and innovate collections processes is required as current approaches and activities are not resulting in collections of monies owed to the Province,” the report said.

The Tyee asked the Finance Ministry what changes have been made to administration of the SVT since 2023, when the audit was conducted, as well as for an update on the backlog of accounts waiting for action, the amount of debt covered by liens and how much money had been written off as bad debt.

A spokesperson for the ministry sent bullet points that largely failed to directly answer the questions.

Liens can be removed quickly once owners declare and qualify for an exemption or pay what they owe, he said, but he did not provide the updated figure for how much debt was covered by liens.

In 2024 the government made an amendment to the Speculation and Vacancy Tax Act to extend the time allowed to audit and assess late declarations in order to improve the process and ensure people are paying what they owe, he said.

It has also improved the process for placing liens on properties, begun using “automation tools and machine learning to improve risk assessment and audit processes” and implemented “a process to better integrate tax tips from the public into the audit process.”

The most recent B.C. budget announced that starting in 2027 there will be a $250 penalty for late declarations.