Members of the real estate industry have expressed considerable concern over yesterday's tabled value-added tax (VAT) legislation, claiming that it raised more questions than answers.
"We're still trying to comb through the bill," said a realtor, who wished to remain unnamed, adding that several realtors shared concerns over the taxes applicable to professional fees within the industry, including realtor commissions and legal fees.
"We need to educate the public as to how this will be affecting us."
While the new legislation revealed that several key services of the real estate industry, including sales of vacant land, would be exempted from VAT, the tax statuses of professional fees have not been directly addressed.
"My main concern...is in house financing," said another realtor, arguing that lingering uncertainty over term agreements could harm the industry. "How do you apply the tax in those situations when only 10 percent of the funds change hands?"
Pertaining to real estate, the services that will be exempted from VAT are sales or rentals of residences, sales of vacant land and leases of land if intended to be used for the construction of a dwelling.
Mike Lightbourn, owner of Coldwell Banker Lightbourn Realty, stated that the exemptions were "good news", but stressed that VAT would still have an "adverse effect on the economy".
"We know the government needs to raise money," said Lightbourn. "But I think the amount of money we collect will be less than it costs to collect it."
While the exemptions were a positive sign for the real estate industry, Lightbourn felt that similar concessions were required for the construction sector.
"We need to stimulate construction...it has such a great multiplier effect on the economy," stated Lightbourn.
Another real estate representative said that exemptions for professional fees were unlikely, given similar VAT legislation in the region and the government's previously proposed VAT legislation.
"Even in the November draft...services rendered during transactions were subject to VAT...I wouldn't be surprised if that was still the case because that is how it works for other countries in the region."
Yesterday's tabled bill confirmed that the government still intends to implement a single 7.5 percent VAT rate across most industries, with few service exemptions. No goods are exempted and there have been no broad tariff reductions.
The government is currently in the process of establishing a new central revenue administration (CRA) to consolidate the collection of a number of taxes and fees in a more efficient and effective manner.

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