Buffalo, N.Y. (WBEN) - Congressman Brian Higgins (NY-26) has formally asked United States Trade Representative Katherine Tai to open formal consultations with the Canadian government to explore if the Underused Housing Tax is inconsistent with the United States-Mexico-Canada Agreement (USMCA).
"This tax of underutilized properties imposed on Americans does not treat equally Canadian citizens," said Congressman Higgins on Tuesday while at the Buffalo-Niagara International Airport. "We believe this tax is in violation of the U.S.-Mexico-Canada Free Trade Agreement."
Canada recently imposed a 1% tax on "vacant or underused housing" owned by non-resident, non-Canadians. The intent was to target foreign investment speculation negatively impacting affordable housing in Canada, but it is impacting good-faith, longtime cottage owners who have maintained and enjoyed living among their Canadian neighbors for years.
"People that have cottages in Thunder Bay, Crystal Beach, Sherkston, Fort Erie, now have to pay a tax to the Canadian government. So we believe this is, again, in direct violation of the principles that these countries - United States, Mexico and Canada - do not discriminate against each other, including, as it relates to internal taxes," Rep. Higgins said.
In a letter written by Rep. Higgins to Ambassador Tai, he says Western New York and Southern Ontario exemplify a unique bond between one another. However, the UHT's impact on Americans who own property in Canada threatens the binational community and appears to be inconsistent with the USMCA.
One of the principles of the USMCA is the requirement that all parties not discriminate against each other or provide preferential treatment solely to domestic companies or citizens, including with respect to internal taxation. Canada's Underused Housing Tax does not apply equally to Canadian and U.S. citizens, and therefore may violate these principles.
The USMCA stipulates parties can request consultations with another party when trade agreement disputes arise.
What Higgins is asking for going forward is an exemption for Americans who own seasonal recreational properties in the Toronto area.
"These are not underutilized properties, they're not vacant properties. These are properties that are utilized during the time of the year when they were intended to be utilized. That's what they were built for," he said. "They're along the beaches of Lake Erie and Lake Ontario, these are cottage communities - Crystal Beach, Bay Beach, Fort Erie, Thunder Bay - so we think that a reading of this will prompt the U.S. Trade Representative to open up their consultation with her Canadian counterpart toward the goal of repealing this tax as it relates to Americans who own cottages."
Higgins began sounding the alarm about the Underused Housing Tax since it was first proposed in the Government of Canada's Budget 2021. Most recently, Higgins asked the U.S. Secretary of State to object to the Underused Housing Tax in conversations with the Government of Canada.
Outreach from frustrated U.S. residents has increased in recent weeks, as the April 30 tax form deadline approaches in Canada. Higgins has heard from hundreds of U.S. residents negatively impacted by the Underused Housing Tax, including over 320 property owners who completed an online survey.
"My hope is that they will get on this, because reading this tax, and reading of the principle that these countries don't discriminate against each other, including issues of internal tax, we believe is a direct violation of the principles of this free trade agreement," Higgins said.
