The government’s housing incentive scheme will be unfair to low-income earners and discriminate against buyers of second-hand and self-built homes, which have as big a multiplier effect on the economy as new homes do, say industry executives.
Since the incentives do not cover self-built homes, the Home Builders Association wants the government to refund the 7% value-added tax to customers buying them from builders.
“That way, the government would collect more corporate tax from home building firms, as they have to declare their tax invoices to the Revenue Department,” said president Vibul Chantradilokrat.
At the same time, builders must ask for tax invoices from construction materials and equipment suppliers, creating a multiplier effect that would bring all parties involved in building homes into the system, he said.
The new government programme allows people to deduct up to 10% of the cost of a new home worth up to 5 million baht from their personal taxable income over the course of five years in equal amounts.
However, a senior Finance Ministry official yesterday pointed out that many low-wage earners pay no income tax, and a person would need to earn at least 30,000 baht a month to see any benefit.
Only taxpayers subject to the highest rate of 37% _ those with at least 4 million baht a year in taxable income _ are eligible for the 10% ceiling, said the official.
“Many low-income earners don’t even need to pay a single baht in tax if they invest in items that the government promotes as tax incentives such as retirement funds and other long-term fund or life insurance,” said the official, adding that those earning 360,000 baht a year or more would benefit.
Satit Rungkasiri, director-general of the Revenue Department, said about 100,000 homes would now fall under the scheme.
Of these, 93,000 units cost less than 5 million baht, including 30,000 units priced less than one million baht.
Deputy Finance Minister Boonsong Teriyapirom said the government had no plans to offer interest-free mortgages for five years to first-time buyers.
However, he said it was up to the Government Housing Bank to decide whether it wants to do so.
Asked whether the incentives would not help low-income earners own a residences, Mr Boonsong declined to answer.
The Real Estate Information Center said 104,300 new units priced at 5 million baht or less are available _ 89,000 single houses and townhouses and 15,300 condos.
Sopon Pornchokchai, president of the Agency for Real Estate Affairs, a property consultancy, expressed opposition to the government’s housing incentive scheme.
A maximum unit price of 5 million baht would help only high-income earners, as buyers would need a monthly income of at least 100,000 baht, he said.
“This will be a disaster for low-income earners, as financial institutions will prefer lending to high-income earners at the expense of low-income customers. Chances for low-income earners to own a home are even dimmer,” said Mr Sopon.
The Finance Ministry official said the home-price ceiling of 5 million baht was meant to help push condominium sales in Bangkok, but in reality city condos already enjoy healthy sales, and the supply would be absorbed within 10 months even without this measure.
Estimates of only 1.7 billion baht in lost tax revenue are too low, as the actual figure could be as high as 27 billion, said the official.
“Worst of all, this incentive does not help people buying second-hand homes, instead covering only units that developers have built for sale. This goes against what the government keeps saying about wantinga to help the majority of people, as this incentive is aimed at only one specific group,” said the official, adding that the government could help low-income earners by setting the maximum unit price at one million baht.
That way, 22,000 units would be available, and if second-hand homes were included, then the number would be 50,000. The official added that assistance for high-income earners should be limited to cases such as natural disasters, or else it would appear to be discrimination.
Source: Bangkok Post