–with news of removal of VAT on building material, the possibilities are endless, businessmen say

By Tamica Garnett

HOME ownership will now be placed that much closer in the reach of many who have been dreaming of it but weren’t quite sure they could afford it, following President Irfaan Ali’s announcement on Monday that effective January 1, 2021, Value Added Tax (VAT) will be removed from construction materials.
For some, it is not just about what the reduced price will mean for prospective builders, in terms of making construction more affordable, but for what it will mean for the wider economy going forward, when a domino effect takes over.

“The impact will be immediate, and will have a ripple effect for individuals, because it means more disposable income for those constructing,” noted Minister of Housing and Water, Mr. Colin Croal.
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That sector drives the economy, and if you have the removal of VAT on construction material, there will be advantages for the entire construction industry, because it would encourage persons with more disposable income to do more construction,” he added.

Tasked with finding affordable housing solutions for the over 62,000 housing applications in the system at the Central Housing and Planning Authority (CH&PA), this move will make it that much easier for the Ministry to give house-lots to persons applying for one to build their own home.
However, Minister Croal says it’s not just about making work at the Ministry easier, but the focus is what this move means for citizens, and making life that much easier for them.

“It’s not really more about making my job easier; it’s more about bringing relief to the people,” he said, adding: “If we want to encourage construction; if we want to encourage persons to build, it’s a big move to remove the VAT on construction materials. It brings more savings to persons, and brings more disposable income for persons to build with.”

MULTIPLIER EFFECT

Sharing the same sentiments as he was Chairman of the Private Sector Commission, Mr. Nicholas Boyer who says that such a move will be a positive economic multiplier that will reverberate across other industries.
“Let’s say a person kicks off a construction project: They pay me; I pay my carpenters. And then my carpenters go on to buy things they couldn’t afford before; and then those companies receive money and spend it back into the economy,” reasoned Boyer, who is also President of the Georgetown Chamber of Commerce and Industry (GCCI).

He’s also a Director at National Hardware Limited, which is among the country’s biggest hardware and building material stores. With home ownership costs down, Boyer posits that this will now open more possibilities for construction work, thereby expanding the construction industry and increasing the effect it will have on the economy.
“This has brought down the cost of home ownership by 14 per cent,” the city businessman said, adding: “It’s more money in the pockets of the people who are building the homes. More consumers are now going to find construction more affordable, so if they were less inclined before to repaint, or add a new bathroom, with this, some amount of people went from not being able to afford it, to now being able to afford it. And that will create the ripple effects with the jobs, and the ripple effect for the economy.”

Also in the interest of home owners and prospective home owners, the President also announced an increase in the ceiling for which tax-deductible Mortgage Interest Relief (MIR) will be offered. While MIR previously offered refunds on interest paid on mortgages of up to $15M, President Ali declared that it will now be offered on mortgages of up to $30M.

What this means for the ordinary man is that they will get back a portion of the money paid on their monthly mortgage that went to the interest. Introduced in 2013 under the Guyana Revenue Authority (GRA), the Relief takes the form of tax refund that the GRA credits to the beneficiary, after they would have filed their annual income tax.
“We have decided, in terms of mortgage interest relief, to increase the sum to $30 million,” President Ali declared. “Interest incurred on housing loans of up to $30 million will now be deductible from our income tax. This will help new home owners, help young people,” the president said during his address to the nation on Monday from the Arthur Chung Convention Centre (ACCC), the temporary home of the National Assembly, in light of the advantages it has to offer in keeping with COVID-19 restrictions.
However, while the MIR increase will mean benefits to those in the higher-income bracket, it is the removal of VAT on construction material that many are zeroing in on, and are appreciating, because it will mean across-the-board benefits for anyone looking to shop up on building materials, regardless of their income.

‘AN EXCELLENT MOVE’
“It’s an excellent move, because a lot of young persons are struggling to build their homes, and they are now able to do so at a reduced price. So, kudos to the president for doing it,” said Lisa Agard, a homeowner herself, who built her home a few years ago.
“The opportunity is now presented for persons to take that step in acquiring their own home; that’s a dream for the average Guyanese,” she added.
As things stand currently, building material attract a 14 per cent VAT, the removal of which will now mean that for every $1M a buyer spends on that commodity, they will save $140,000 when the measure is applied, and instead pay just $860,000.
“It’s an absolutely brilliant idea! It means more monies to spend on the building,” said Neville Butts, who first started building his home some six years ago at Herstelling, on the East Bank Demerara.

Since he is still working on his home, Butts is looking forward to cashing in on the savings when the time comes.
Also building on the East Bank Demerara is Dollette Goring, who knows all too well what this VAT removal will mean for the average homeowner, as she has been working on the construction of her home for the past two years, and is some 85 per cent away from finally getting the job done. For her, building her own home has not been an easy journey.

“It’s challenging; very challenging,” Ms. Goring said, adding:
“For a lot of us, we would be able to save a lot in terms of the cost of materials. It would be a plus for many people; it did come at an opportune time.”