Chamber of Real Estate & Builders' Associations, Inc.

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From the Chairman

Charlie A.V. Gorayeb

Charlie A.V. Gorayeb

Chairman of the Board, CREBA Chairman, CREBA Advocacy & Legislative Affairs Committee Honorary Consul General, Republic of Djibouti

Preserve VAT exemption status quo

The Chamber appeals anew for immediate government intervention against the looming value-added tax imposition on housing purchases, as the three-year reprieve under Republic Act No. 10693 or the Tax Reform for Acceleration and Inclusion (TRAIN Law) ceases by December 2020.

Such intervention is imperative not only to stimulate the housing industry as the number one economic pump-primer, but also to provide relief millions of overseas Filipinos and low-income earners who have yet to acquire homes of their own and continue to suffer from the effects of the Covid-19 pandemic.

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, based on the present-value adjustments made by the Bureau of Internal Revenue (BIR) in 2011. Yet, although negative economic conditions continue to prevail and prices continue to spiral, the exemption threshold will be reduced to only P2 million for house and lot packages, and none at all for lots, starting January 2021.

Against an eerie backdrop of a housing backlog of at least 6.57 million units, with the supply and demand gap getting wider by 300,000 units every year, such a policy seems oblivious of the primordial role of government to enable its citizens to acquire homes 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 crippling effect 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 VAT collection of about P6 billion from 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.

Published in the Manila Bulletin October 24, 200

Reporter: Johannes Chua

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