This paves the way for companies operating in the industry to levy five per cent on the houses they sell and remit same to the government.
A Tax Policy Advisor at the Ministry of Finance, Dr Edward Larbi-Siaw, who confirmed the passage of the law, disclosed that the ministry hopes to collect about GH?50 million from the tax between now and December this year.
“As you can see, the housing sector is developing and we feel that each sector of the economy must contribute to the development of the country by way of taxes,” he said, but stated that the move would have a direct impact on the prices of housing units.
“As for the impact on the prices of houses, that one is obvious; it will lead to an increment but that increment will be very minimal,” Dr Larbi-Siaw said.
However, the Ghana Real Estate Developers Association (GREDA) said it was concerned about the impact of the tax on prices of houses, people’s qualification for mortgages and the country’s housing deficit.
The tax, it said, would be excruciating for the industry and could even lead to the crippling of the entire real estate industry.
The association had earlier petitioned the government in January last year, through the Finance Ministry, to exempt real estate developers from the 17.5 per cent VAT that was originally announced.
GREDA’s Secretary to the Executive Council and Acting Executive Director, Mr Sammy Amegayibor, told the paper on April 14 that the introduction of the tax meant that the woes of the sector could worsen because it would stretch the prices of houses far beyound the reach of the majority of low and middle income earners.
Already, Mr Amegayibor said real estate developers were under severe pressure as a result of the fast depreciating cedi, erratic power supply and a slump in demand as a result of the current challenges in the economy.
“So, if you impose five per cent flat VAT on housing at this crucial moment, then it is just like trying to exterminate the industry. GREDA has always explained that the tax is automatically going to increase the prices of houses and even disqualify many more people from the mortgage bracket,” Mr Amegayibor, who doubles as Managing Director of Rumuel Development Co. Ltd, said.
He gave a scenario that a house that used to cost about US$100,000 (GH¢275,000, using an exchange rate of GH¢2.8 to one dollar) in January 2014 will now cost about GH¢380,000.00, given the depreciation of the cedi at GH¢3.8 to a dollar.
"If you add the 5 per cent VAT (GH¢19,000), then the house will cost you a total GH¢399,000 and that is way beyond the reach of many Ghanaians," Mr Amegayibor said.
The new tax on the estate sector, the first of its kind in the country, is part of a string of revenue generation measures by the government to help shore up revenue and bring down a burgeoning budget deficit. The deficit, which was 10.1 per cent last year, has since eroded the fiscal space and denied key sectors of the economy the needed liquidity to grow.
Dr Larbi-Siaw said the expected GH?50 million would help complement similar returns from new interventions such as the 17.5 per cent VAT on financial services and petroleum products introduced late last year.