VAT ails property development, tourism

Dar es Salaam. The government has not heeded pleas by housing developers and tour tourism players to scrap value-added tax (VAT).

Stakeholders from the two sectors say the 18 per cent tax is still a burden to consumers.

Developers have been complaining that the VAT on construction materials and finished houses has been a stumbling block for them to build houses for low-income earners.

Watumishi Housing Company CEO Fred Msemwa told BusinessWeek that the issue was not addressed in the 2017/18 budget.

“We will keep on working to see if the government can review its decision on this,” he said.

VAT on finished houses stand at 18 per cent. Developers have been calling on the government to either scrap it or reduce to 15 per cent.

However, developers are happy with the introduction of property tax to finance the national budget.

According to him, the government will get more funds to invest in roads, water electricity and therefore increase value of property.

He said the tax could be a challenge at the beginning but it is charged across the world and will encourage people to own properties because the government will build infrastructure that will lessen the public’s burden. National Housing Corporation corporate public affairs manager Yahya Charahani believes that if VAT is scrapped more low- income earners will be able to buy houses.

“The 18 percent VAT is too high and we have been calling on the government to reduce it to at least 15percent to no avail,” he said.

According to him, it will remain a burden to low-income earners who cannot afford to have houses.

Meanwhile, real estate expert Sultan Mndeme said developers could impose the 18 percent VAT on housing to their customers.

He said the government ought to have exempted it as it has been an outcry for most developers who aim to build low cost housing for low income earners.

“While we are still struggling with the VAT on housing, the government has come up with property tax that is going to increase the burden on property owners.”

According to him, by just owning a property one now has to pay land rent, property tax, income tax on rented property and withholding tax. He said that was burdensome.

He noted that having property did not necessarily mean someone is rich as the majority of people were retired and living in their houses and now had the burden of paying extra levies on their properties.

In another development, Tourism Confederation of Tanzania executive secretary Richard Rugimbana said the government scrap of VAT on hunting was a burden.

He said when VAT was introduced last year there was an outcry as the majority of tourists had already booked to tour in the country.

“The VAT is still there, but we are yet to know the impact whether the number tourists coming to the country will fall or increase, and therefore whether their complaints were valid or not,” he said.

He noted that, they will be in a position to know the impact of the government’s decision to maintain the VAT during the high season including months of June, July and August which attract more tourists.