EDITOR’S NOTE: This is an article from Charlie A. V. Gorayeb, national chairman of CREBA (Chamber of Real Estate & Builders’ Associations, Inc.)
The Chamber of Real Estate & Builders’ Associations, Inc. (CREBA) has appealed anew for immediate government intervention against the looming value-added tax imposition upon housing purchases as millions of overseas Filipinos and low-income earners who have yet to acquire homes of their own continue to suffer from the effects of the worldwide Covid-19 pandemic.
Among other measures to stimulate the property industry, this call-out by the country’s largest real estate and housing developers group to government takes a high pitch as availment of VAT-exempt home packages granted a three-year reprieve under Republic Act No. 10693 or the Tax Reform for Acceleration and Inclusion (TRAIN Law) ceases by December 2020.
A robust housing industry, which can wield enormous globally-recognized economic multiplier effects, will be a primary catalyst for economic recovery to help the entire country 'heal as one.'
TRAIN exempts buyers from payment of VAT for lots up to P1.9 million and for house and lot units up to P3.2 million cognizant of the 2011 adjustment made by the Bureau of Internal Revenue (BIR) under the amended National Internal Revenue Code based on prevailing economic conditions and consumer price index. And while these factors have continued its upward trend over the last decade, the cap will be reduced to P2 million come January 2021.
Against an eerie backdrop of a housing backlog of at least 6.57 million units, with supply and demand gap getting wider by 300,000 units every year, such a policy seems oblivious of the primordial role of government to provide housing for its citizens as a constitutional social right – housing being a basic human need.
As real estate developers have no choice but to fully pass-on VAT to homebuyers, housing prices will surge beyond the affordability of the millions of homeless Filipinos. For a 30-year loan for a P3.2 million house and lot, for example, the 12 percent VAT of about P360,000 actually translates to P1 million.
The need for physical distancing practices as a major health and safety precaution has made the need for decent, livable communities and affordable housing ever more urgent and pronounced. What homebuyers need at this time while still reeling from the staggering impacts of a worldwide health pandemic are not new tax burdens but fixed, low-interest, long-term housing loans assistance by government.
Amid an all-time high unemployment due to closure of many businesses all over the world, the perceived annual collection of about P6 billion by imposing VAT on housing simply cannot compensate for what could be a massive housing industry slowdown. A robust housing industry, on the other hand, which can wield enormous globally-recognized economic multiplier effects, will be a primary catalyst for economic recovery to help the entire country “heal as one.”
CREBA hopes for the immediate issuance of an appropriate BIR revenue ruling to preserve the status quo on VAT-exempt housing packages and provide the millions of yet homeless Filipinos the chance to a dignified quality of life through decent and affordable homes.