Group opposes proposed VAT exemption for housing

A local think tank has claimed that the proposed exemption of housing for value-added tax (VAT) coverage is insensitive and not an effective way to develop the industry.

In a position paper on Thursday, the Action for Economic Reforms (AER) said the permanent exemption was proposed through Senate President Pro Tempore Ralph Recto’s amendment to the Corporate Recovery and Tax Incentives for Enterprises (Create) bill.

“If Senator Recto really wants to push for more affordable housing, it shouldn’t be done through permanent VAT exemption for the sector,” it added, citing that permanently removing the VAT on housing contradicts the tax reform objectives of reducing tax leakage and making the tax system more efficient.

---

---

AER explained that the Tax Reform for Acceleration and Inclusion Act, which took effect in 2018, addressed the rationalization of the VAT, lifting the exemption to housing. Thus, it claimed that returning to the old regime of VAT exemptions for housing would be a step backwards.

“VAT exemptions result in foregone revenues which otherwise could finance development programs, including housing. They create inefficiency in tax registration, resulting in further revenue losses,” the think tank said.

It added that the Department of Finance estimated the permanent exemption of VAT for housing would result in a total revenue loss of P32.5 billion from 2021 to 2024.

For his part, AER Coordinator Filomeno Sta. Ana 3rd was quoted as saying that VAT exemptions must be limited to essential goods and services that are consumed by the poor for them to substantially benefit.

“VAT exemptions on housing, however, do not actually target the poor households; the sad truth is that it costs millions to have a decent house built, an amount that the poor cannot afford. Those who benefit therefore are the upper classes,” he emphasized.

“Recto is irresponsibly funneling funds away from development programs for the marginalized, the most vulnerable during this period of pandemic and natural calamities.

VAT exemption means foregone revenues, which Sen. Recto concedes, are revenues that could have been used to finance the fight against the pandemic or to finance disaster relief and mitigation,” he added.

What we really need, Sta. Ana added, are not VAT exemptions, but more funding for housing programs for the poor, especially in the light of the difficulties brought about by the pandemic.

“New public housing now has to address the high density of population and poor living conditions, making it difficult to meet minimum public health standards, such as social distancing and proper sanitation mechanisms,” he highlighted. “This simply adds to the problem of underfunded housing programs and the current housing backlog of 6.5 million.”

---

---

With this, AER urged the Congress to strike down Recto’s VAT exemption amendment, although it said that suspending the VAT for socialized housing with a cap on values for a short and defined period would be a reasonable compromise. A suspension of the VAT during the pandemic can be part of the stimulus package, but AER stressed its temporariness.

“There are much better ways by which policy can help housing,” AER said, providing a set of recommendations for the housing sector. One of its recommendations is providing targeted, direct subsidies for eligible socialized housing beneficiaries through a voucher system.

#realestateblogph | #realestateblogphpropertynews | #REBPH

---

Article and Photo originally posted by Manila Times last November 13, 2020 10:04am and written by Mayvelin U. Caraballo.

About Post Author