The country’s housing chief is appealing for an extension of the tax perk for purchases of residential units worth P2 million and above next year in order to keep prices affordable amid a pandemic-induced recession hurting both supply and demand.
In a letter to Finance Secretary Carlos Dominguez III last July, Department of Human Settlements and Urban Development (DHSUD) Secretary Eduardo Del Rosario sought to retain the prevailing value-added tax (VAT) exemption on the sale of low-cost housing and house-and-lots within the P3,199,200 threshold.
Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the VAT exemption will only apply to socialized units, house-and-lots and other residential dwellings that will be sold at P2 million and below starting Jan. 1, 2021.
The lower tax-exempt threshold in 2021 “will surely have a significant impact on the sales of real properties intended for low-income buyers,” Del Rosario told Dominguez.
The DHSUD appealed that the Department of Finance (DOF) review this specific TRAIN Law provision to keep housing affordable.
In a text message on Saturday, Del Rosario said he and Dominguez had already been able to meet and discuss the housing sector’s concern.
“He (Dominguez) favorably reacted, but no formal commitment or written directive yet” to review the TRAIN provision, Del Rosario told the Inquirer.
In the letter, Del Rosario said “the housing industry is now confronted with bigger challenges with the far-reaching consequences of the COVID-19 pandemic.”
“The economic slowdown will definitely decelerate housing production and severely impair the capacity of homebuyers as more workers and employees here and abroad are being displaced,” Del Rosario said.
Housing developers will also take a hit as they were struggling to restart their businesses and finding ways to account for the heightened costs of development and construction, which is now compounded by additional rigorous compliance with health protocols and standards, Del Rosario added.
“To a reasonable extent, our developers can make use of the tax savings from retention of the VAT-exemption threshold beyond Jan. 1, 2021. Our homebuyers will be the ones to ultimately benefit from any kind of fiscal incentive even in the form of tax relief herein prayed for, especially during this time of crisis,” Del Rosario said.
For Del Rosario, the government needed the support and participation of the private sector in addressing the growing housing demand such that keeping the tax perk would help “make the housing sector one of the anchors for the recovery of the Philippine economy.”