The Department of Finance is eyeing the possibility of giving direct subsidy to buyers of socialized housing or those units priced at P450,000 and below, DOF Undersecretary Karl Kendrick Chua told the Philippine News Agency.
In a phone interview following the 1 With the 99 Tax Reform Forum Wednesday, Chua said the subsidy system for socialized housing is better than the value-added tax exemption as it will directly provide the benefits to the deserving families.
This move is part of the broadening of VAT base under the Tax Reform for Acceleration and Inclusion (TRAIN), wherein the government eyes to repeal around 80 special laws that provide VAT exemptions.
The special law granting VAT exemption on socialized housing and low-cost housing, which prices range above 450,000 to PHP3 million, will also be included.
“Under the House Bill, the socialized housing — that’s the P450,000 per unit and below — will be VATable once there is a voucher system for the poor. The benefits would change from tax exemption to a subsidy system,” Chua said.
The DOF official noted that this is one of the solutions to address the country’s housing backlog of 5.7 million.
“For low-cost housing P450,000 to P3 million, the buyers will be the income taxpayers who benefit from lower income tax,” Chua, on the other hand, mentioned.
The Tax Reform for Acceleration and Inclusion Act will also reduce personal income tax of 99 percent of the country’s taxpayers.
“That’s enough to accept the slight increase in housing prices,” the official added.
But Chua noted that the effect of the 12-percent VAT on low-cost house prices will only be 4.0 percent.
“The VAT is 12 percent, but it’s not true that the increase (in prices) would be 12 percent; only around 4.0 percent,” he stressed.
“If the housing is VATable, the developer can pass the input VAT to consumer. If exemption, they cannot pass it so they will just increase the price per unit. So that’s what’s really happening. Only the additional VAT on top of the input VAT will be passed on, that’s why it’s 4.0 percent,” he explained. (PNA)
