The Ghana Real Estate Developers Association (GREDA) has expressed regret at the government’s imposition of the flat five per cent tax on the real estate sector, contrary to the four per cent agreed on earlier.
The government in the 2015 Budget statement has imposed a flat rate of five per cent on the sector. The real estate tax was part of the new tax reforms meant to generate additional resources for the National Health Insurance Scheme.
GREDA explained that when the idea of imposing a tax on the sector came up, a committee comprising representatives from both the government and the association, was set up and after discussions, a flat rate of four per cent was agreed on.
“When we had the discussion, they insisted that some form of tax had to be imposed on the real estate sector, we suggested a three per cent flat rate, they wanted five per cent but finally four per cent was agreed on. We are, therefore, taken aback to hear about the five per cent imposition in the budget,” the Executive Director of GREDA, Mr Sammy Amegayibor, said in an interview.
GREDA, he said, initially did not agree to the imposition of additional taxes on the sector because of the enormous challenges already facing the housing industry.
“Our original position on taxes on real estate is that we don’t expect that in view of the huge housing deficit, and all the challenges that are associated with our industry, we will still be slapped with more taxes,” he said.
He explained that the additional tax would be a burden to prospective home owners because it would lead to an increase in the price of houses.
“When we say that no form of tax should be imposed, it doesn’t mean we are already not paying tax. We are already paying VAT on the cement and building materials that we use, and that is why we are saying that any additional form of tax is not the best.”
Tax for consumer
Mr Amegayibor , however, hinted that consumers in the real estate sector would bear this new tax and not the developer, although it will have a pass through effect on the business of the developer.
“Government still insisted that they want to tax the people, it is not the developer that will pay for it, because the developer will pass it on to the buyer. GREDA has decided to petition government because we felt that if the purchasing power of the general populace is reduced, it indirectly affects our business, and people cannot afford houses,” he explained.
Need for explanation
GREDA, he said, would meet with government officials to seek explanation on the rate of tax that was announced.
“Now, we are seeking explanation. We have a meeting with the tax policy advisor to the Ministry of Finance, to seek explanation as to why they did not give us the four per cent which was agreed on during the discussion without even consulting us,” he said.
Credit: Graphic