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Contractors Association head: Tax incentives no real help for developers
Mervyn Chin, president of the Contractors Association of T&T, says developers have not yet started additional construction or taken advantage of tax incentives provided in the 2012/2013 budget.
“The tax concessions last October make it too early for developers to immediately begin physical construction. Developers would need time to firm up financing, finalise designs and particularly get the mandatory statutory approvals, for example, from Town and Country,” he told the Business Guardian on February 5.
In the budget presentation October 1, Finance Minster Larry Howai promised tax incentives for developers to build more houses in order to boost the construction industry.
“I propose to stimulate the construction sector and alleviate the needs for housing stock by exempting from income tax the gains or profits derived from the initial sale of newly constructed houses of the class specified in Section 43 by any person registered in the prescribed manner as a trader in such houses,” Howai had said in the budget.
Chin said developers are interested in the incentives provided in the budget, but some factors could slow down the process.
“Of course, developers are interested as it is an opportunity for a tax break on the profit of the investment. However, given how slowly the public service support reacts, the period of the concession should be extended to five years instead or it will be will be ‘ketch tail’ to make the deadline of entitlement of the concession,” he said.
This does not help the already slow construction environment, Chin said.
“Already, first quarter of the fiscal year has elapsed and business is still very slow. Do not take my word, just look around and tell me if building construction is abuzz. Also, the dry season openly has a few months remaining. The opportunity has been lost.”
Incentives not sufficient
President of the Joint Consultative Council for the Construction Industry Afra Raymond does not believe the tax incentives would attract developers to build more houses.
“At that time when it was announced, I expressed doubts about that tax break because how much taxes would be collected from developers? We really do not know how much sacrificing would be needed to bring in that tax break. I would like to see what the Minister of Finance has said and if it has worked.”
Raymond argued that developers already pay little taxes.
“I am not aware of any clients that have benefitted. As long as you have the Housing Development Corporation (HDC) building houses or selling them cheaply, then there is no incentive.
“The operative question is if property developers pay very little tax anyway, a tax break is not going to be of much help to them.”
Rowley’s response to tax break
Opposition Leader Dr Keith Rowley argued during his budget presentation response last October that the Government's offer of tax breaks in itself is not enough to attract developers to build more houses.
“Fiscal incentives, by itself, or available supplies of cheap money, are no guarantee of a rush to construction. As for stimulating the economy and the construction sector and creating a 'boom’, there is much to be said. We agree with the laudable objective of increasing the housing stock, but the key to the long-term economy must be the long-term health of the economy.
“When people have steady jobs and plan their lives on an orderly basis, then a construction boom will happen. No shrewd investors will undertake land development unless they are confident of the future prospects of the economy,” he said.
Rowley questioned the relocation of Government offices out of the city and such a move impacting on the proposed incentives.
“The Government has over 100,000 square feet of unused office space in a number of empty and partially completed buildings which it ignored at the Government Campus in Port-of-Spain.
“The Government is also busy pursuing a policy of emptying out Port-of-Spain by relocating offices to areas outside the city, mainly to Chaguanas. What, then, is the driving force behind an incentive, behind the announcement of tax breaks, to encourage the construction of commercial buildings?” Afra questioned.
Housing in the budget
Howai’s references to housing in the 2013 budget:
“I propose to stimulate the construction sector and alleviate the needs for housing stock by exempting from income tax the gains or profits derived from the initial sale of newly-constructed houses of the class specified in Section 43 by any person registered in the prescribed manner as a trader in such houses.
“The exemptions provided under Section 42(2)(c) will apply in respect of a house the cost of construction of which, exclusive of the cost or value of the land, in the opinion of the minister, having regard to normal building costs prevailing at the time of its construction, would not exceed at the maximum upper limit of $1.5 million, where construction commenced after October 1 2012.
“The exemptions provided under Section 42(2)(c) will be operative for a period of three years, beginning with the date of the passage of the required legislation.
“We would continue to promote home ownership within the national community. Moreover, home ownership empowers the poor through the acquisition of an asset which, over time, facilitates the creation of wealth through expanding levels of home equity.
“We are focusing primarily on poor, and low- and middle-income households through the 2.0 per cent mortgage programme administered by the T&T Mortgage Finance Company for those beneficiaries who wish to construct their own homes and through the housing solutions implemented by the Housing Development Corporation.
1. The squatter regularisation programme is providing 26,117 residential service lots.
2. The Land Settlement Agency is regularising squatter sites with basic infrastructure: water, sewage, drainage and roads;
3. The Housing Development Corporation would continue its programme of building and distributing homes aimed at reducing the backlog of household applications.
4. The T&T Mortgage Finance Company has included the 2.0 per cent mortgage programme for the former employees of Caroni as they seek to purchase and to construct homes on the residential estates built to accommodate the commitments made to them by Caroni and the Government.
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