HARARE – Governement should adopt a fair tax system for the property sector, which is currently heavily taxed, in order to increase the level of participation by individuals, a real estate expert has said.
Real Estate Institute of Zimbabwe president Mike Juru said it was critical for President Emmerson Mnangagwa’s new administration to embrace a tax regime that encourages growth in the sector.
“As a sector we are heavily taxed, from buying the land to servicing it. The investors pay taxes which include stamp duty, value added tax (VAT), and income tax. When the building is being constructed there are taxes to be paid. These include municipal submission taxes, VAT on materials, Environmental Management Agency fees, and National Social Security Authority fees,” he said.
“When the building is operating there is income tax, (VAT), municipal rates, and lastly when you want to sell the property there are taxes that are charged such as VAT if the property is company owned, capital gains and stamp duty for the transfer. You will note a significant repeat of the same taxes along the chain which to some extent is tantamount to double taxation.”
Juru noted that the property sector contributes immensely to the fiscus, gross domestic product and creates employment.
“Real estate is an enabler of production; you cannot talk of the economy ignoring where all activities take place. With no real estate, banks cannot offer loans since properties provide collateral, the financial services sector is dependent on the stability of the real estate sector as banks lend for economic development. We are in a new dispensation and there is need to create tax reforms that focus on creating development activities, especially in property,” he said.
He further indicated that there was need to acknowledge the critical role played by the sector and further deal with the double taxation currently in place adding that the issue of VAT should be relooked at as it slows down activity on the sellers’ market for individuals.
“A property that is owned by a company is subject to VAT, but a property owned by an individual is not subject to VAT. Say a property is owned by a company and valued for $100 000 and an individual buys from the company, they have to pay the 15 percent VAT bringing the total to $115 000,” Juru said.
“What has ownership got to do with additional tax charged, should companies not own properties? How do we expect individuals in their individual capacities to have adequate capacity to be heavily involved in property development under such circumstance? How does ownership change value of a property? A property is a property,” he said.
Property investment by its nature, provides a hedge against inflation, as such the majority of investments on that front are based on that reason hence owners have been holding on to their units for later disposal in the wake of the country’s economic uncertainty.
A number of property owners who had placed their properties on the market have withdrawn the properties in response to the prevailing economic environment.
Securities advisor, Invictus Capital, recently encouraged investors to buy into property counters on the Zimbabwe Stock Exchange, saying these remained a good hedge against inflation as the country’s official inflation rate has slowly crept up. — The Financial Gazette