Deferment of 10% VAT on housing loans, banking services urged

The Subdivision and Housing Developers Association, Inc. (SHDA), the country’s largest and leading organization of subdivision and housing developers, urged the government to defer the imposition of the 10 percent VAT on housing loan payments and banking services.

SHDA national president, Jesus B. Atencio said that on Jan. 2, 2003, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 12-2003 imposing a 10 percent VAT on services of banks and other financial institutions beginning Jan. 1, 2003 pursuant to Sec. 1 of Republic Act 9010.

"We in the housing sector view this development with much concern and trepidation for it means that, starting this year, all interest payments on housing loans, contracts-to-sell, and receivables assignments coming from our homeowners and buyers will now incur an additional 10 percent of their interest cost on their monthly amortization because of VAT. What is ironic is that, even if the tax is imposed on banks and financial institutions, the effect to them is neutral. They will simply pass it on to our buyers – the ultimate payors of housing loans," Atencio added.

For his part, SHDA chairman of the board Teofisto L. Guingona III said that while SHDA fully understands the pressing need to increase government’s revenues, and "while we support tax collection reforms, SHDA believes that taxation must be undertaken without causing undue and sudden dislocations in such a vital industry like the housing sector."

Taking up the cudgels for the millions of homeowners and housing loan borrowers nationwide, SHDA "strongly urges President Gloria M. Arroyo, DOF Secretary Jose Isidro M. Camacho, BIR Commissioner Guillermo L. Parayno Jr., and the honorable members of both Houses and Congress to consider the immediate deferment of the imposition of 10 percent VAT on housing loans and related financial services, with the end in view of repealing the portion of the law imposing such tax on housing loan borrowers."

Bienvenido S. Uy, chairman of the committee on taxation of SHDA, said that the 10 percent VAT negates whatever reforms the Arroyo administration has undertaken to make housing and housing finance more accessible and affordable to the mass of homeless Filipinos.

"While we have successfully lowered interest rates to make housing more affordable, the imposition of 10 percent VAT increases interest rates once more. Higher interest rates mean higher monthly amortizations and less affordability. Ultimately, higher monthly amortizations mean that less homeless Filipinos can obtain housing loans and be part of the President Arroyo’s housing program," Uy added.

Guingona III said that the Pag-IBIG Fund has been at the forefront of government-assisted housing finance. With the imposition of 10 percent VAT on loan payments, an estimated 350,000 housing loan borrowers and 1.5 million members paying multi-purpose loans will be severely affected.