“Alam mo ba, kaya lang pumupunta sa abroad ang mga OFWs, for them to be able to buy a home for their family—yun ang kanilang biggest investment…” these were the words of senator Cynthia Villar regarding the Department of Finance’s (DOF) lifting of the VAT exemption on low-cost housing.
The Department of Finance proposed the removal of VAT exemption to low-cost housing units that costs an average of P450,000 to P3 million. The VAT amounts to 12% of the cost of the housing unit. The Tax Reform for Acceleration and Inclusion (TRAIN) bill that proposes the addition of Value Added Tax (VAT) on low-cost housing has been passed by the House of Representatives and is currently being deliberated in the Senate.
Tax Incentives that OFWs Enjoy
In recognition of the invaluable contributions of OFWs in the Philippine Economy, the government has since provided our bagong bayani with tax incentives. OFWs are exempt from paying income tax, travel tax and airport fee, documentary stamp tax for every remittance sent and shipment tax for every 3 balikbayan boxes sent in a year.
Truly the government has been proactive in developing incentive packages for OFWs as a way of thanking them for their economic and technological contributions.
Opposition to VAT
The imposition of VAT by the Department of Finance has met some resistance from some sectors, particularly from the housing and OFW sectors. Cynthia Villar has been openly critical of the proposed VAT. The senator said that OFWs can only afford the low cost houses ranging from P 450,000-P 3 million –the bracket that will be losing the exemption.
Senator J.V. Ejercito likewise expressed his dismay towards the proposal. The senator believes that this will not increase the collection since the VAT will make people lose the capacity to buy the houses. He feared that upon the passing of the proposal, more people will just resort to simply “occupying” or “taking over” house units.
OFW groups are already in the process of submitting a position paper to the DOF and the senate probing against the said tax imposition.
Increase in Amortization, Can You Afford It?
According to KAMPI founder Luther Calderon, around 60% of those who avail of low-cost housing amounting to P 3 million and below, are OFWs, however they were not informed of the DOF’s plan to lift the exemption.
The average earning OFW can only afford a unit of 3 million and below which is the taxed range for the housing units. For those with homes worth P 450,000 the average monthly payment now is P 3,759. Once VAT exemption is lifted, this will rise to P 4,210 a month. Meanwhile, those in units costing P3 million with a monthly amortization of P25,065 will see their payments rise to P28, 073 once 12% VAT is imposed.
Other than the OFWs, minimum wage earners, contractual workers, and seafarers are the likeliest to be affected by the imposition, since these housing units are their target properties as aspiring home owners.
This is why the best time to invest your money is now and not later. Even “affordable” properties will be beyond reach once the bill has been passed. The efforts of OFWs are definitely appreciated and we hope that those in power will recognize how much this will affect our modern heroes.
Kabayan what are your thoughts about the issue? Let us know by commenting below.