Section 20 of Republic Act 7279 or the Urban Development and Housing Act, provides tax incentives to private developers and government agencies engaged in the development of socialized housing projects.
This includes the exemption from the payment of project-related income taxes, capital gains tax on raw lands used for the project, VAT for the project contractor, transfer tax for both raw and completed projects, and donor’s tax for lands that have been donated for socialized housing purposes.
On the other hand, Executive Order No. 226, or the Omnibus Investments Code of 1987, has directed the Board of Investments (BOI) to provide incentives such as Income Tax Holidays (ITH) to private developers who will venture into mass housing projects.
Still, many private developers experience difficulties in availing said tax incentives because of the stringent requirements of government agencies who are involved in the processing and granting of these tax incentives. Similarly, the processes for availment under the two major laws are somehow duplicating and conflicting. Hence, private sector stakeholders involved in the development of socialized housing are hampered by the tedious, strenuous and costly process of availment. This, in effect, negates the noble intents of the law to provide decent and affordable housing especially to our homeless poor.
All these stem from one major stumbling block: the need to streamline the procedures and adopt a common set of guidelines that will guide multiple government agencies towards the efficient and cohesive implementation of tax incentives provided by law. This is an imperative to make the incentives easily available and encourage private sector support in the implementation of mass housing.
President Aquino has made a clarion call, that is to fast-track the delivery of housing services, increase the housing stock and make them available to the greater majority of Filipinos.
Hence, the Chamber of Real Estate and Builders’ Associations, Inc. (CREBA) has recently proposed the adoption of a set of implementing rules and regulations, with a corresponding Executive Order, which shall expand and strengthen the grant of tax incentives to the private sector participating in the socialized housing program of the government.
CREBA believes that the institutional arrangements for the effective implementation of these tax incentives must be enhanced, harmonised and simplified to encourage private developers to venture into mass housing and socialized development projects.
For a holistic approach to these reforms, the grant of tax incentives must be undertaken through the coordinated efforts of concerned government agencies, such as the BOI, DOF, BIR and the Registry of Deeds (RD), which in turn will adjust their own operating guidelines to align or conform to the implementing rules, with HUDCC as the lead implementing agency.
An inter-agency Executive Committee acting as the overall coordinating body should be able to formulate policies and general rules needed for the uniform implementation of the tax incentives, and at the same time, assist private developers and the shelter agencies in the immediate resolution of conflicts, if any.
The requirement of securing a ruling from the BIR head office on a per project basis prior to the issuance of Certificate Authorizing Registration (CAR) or Tax Clearance (TCL) to BOI-registered developers must finally be dispensed with. Instead, we appeal to the BIR to accept the Socialized Housing Certification issued by the HLURB as the only requirement for the issuance of the CAR and TCL to the Registry of Deeds.
We are confident that with a set of rules and regulations governing the tax incentives provision of the law in place, the private sector can more efficiently do its share in addressing an estimated 4 million housing backlog.
Published in the Manila Bulletin July 2012