Your Dalhousie land purchase comes to $1 — plus 154,200% sales tax

Your Dalhousie land purchase comes to $1 — plus 154,200% sales tax

Developers interested in prime real estate being sold by Dalhousie next to the town marina for $1 are going to have to come up with more than 15 cents HST to cover sales tax on the purchase — $1,542.85 more to be exact.

"We can't really do anything about that," said Gilles Legacy, Dalhousie's clerk and treasurer.

"They'll [buyers] have to pay for that. The land itself is a good start for any business." 

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Dalhousie has received national attention for a plan to sell 19 parcels of land in the town for $1 each to encourage economic development. 

But the scheme is being hampered by a provincial tax policy that makes it impossible to sell land that cheaply in New Brunswick — even for those who want to.

Waterfront assessment up 45%

One of the most attractive locations among the Dalhousie properties is a five-hectare stretch of waterfront on the Restigouche River next to the region's only marina.

The $1 sale price to anyone with a viable plan to develop the property has attracted no offers so far, but that didn't help the town with provincial property assessors.

They decided the land was worth a lot more and despite the rock-bottom sale price increased its tax assessment this year by 45 per cent to $154,300.   

And because the province charges a one per cent sales tax on property transactions based on whichever is higher — the sale price or the assessed value  — anyone who eventually buys the marina property will now have to pay $1 to the town and then pay $1,543 in sales tax to the province.  

'Buyer' has responsibilities

That's an effective sales tax rate on the marina property of 154,200 per cent.

Legacy said there is nothing Dalhousie can do about that.

"Hooking up your water, and all the utilities and paying the taxes that they have to pay to the province — that will be all their responsibility," he said.

The 19 properties in Dalhousie on the market for $1 each all come with built-in sales tax bills of some kind because of their assessments, ranging between $11 and $2,107.

Earlier this month the New Brunswick Real Estate Association called on the province to strike a task force to look at property assessment and tax issues, including the issue of taxing the sale of properties using assessed values when they are higher than actual sales prices.

"When your property sells, you should be taxed on what you paid for it not on an arbitrary value somebody else has made up," said Kari McBride, spokesperson for the association.

"We want the tax to be based on what actually is, not what if."

The property transfer tax has been one of the province's fastest growing sources of revenue, quadrupling over the last five years to $23 million.

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The tax rate was a modest $2.50 per $1,000 of a property's sale price for several years until Progressive Conservative finance minister Blaine Higgs doubled that to $5 per $1,000 in 2012 and Liberal finance minister Roger Melanson doubled it again to $10 per $1,000 in 2015.

When asked for a rationale for charging sales taxes using assessed values when sale prices for properties are low, the Department of Finance had no immediate response.

Bonnie Doyle Creber, a spokesperson with the department, said in an email that she was working on the request.