The Ghana Real Estate Developers Association (GREDA) and the Call for VAT Removal on Immovable Properties.

The Ghana Real Estate Developers Association (GREDA) has made a significant call for the removal of the 17.5% Value Added Tax (VAT) on immovable properties in the mid-year budget. This plea highlights the challenges facing the real estate sector and the broader implications for the economy. To understand the context and implications of this request, it's essential to delve into the history, the reasons behind the call, and the potential outcomes if the government heeds GREDA's appeal.

 Background of VAT on Immovable Properties

Value Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. In Ghana, the 17.5% VAT on immovable properties was introduced as a means to generate revenue for the government. However, this tax has been a point of contention since its inception, particularly among stakeholders in the real estate sector.

The real estate sector is a critical component of Ghana's economy, contributing significantly to the GDP and providing numerous jobs. However, the imposition of a 17.5% VAT on immovable properties has been argued to stifle growth and development in this sector. GREDA's call for the removal of this tax is rooted in the belief that it hampers the affordability and accessibility of housing for Ghanaians.

 Reasons Behind GREDA's Call for Removal

1. Affordability of Housing: One of the primary arguments GREDA makes is that the 17.5% VAT significantly increases the cost of housing. For many Ghanaians, owning a home is a major financial goal. However, the added cost from VAT makes it challenging for the average citizen to afford a home. By removing this tax, GREDA believes that housing will become more affordable, thus enabling more Ghanaians to achieve homeownership.

2. Stimulating Demand: High costs deter potential buyers, leading to a slowdown in the real estate market. By eliminating the VAT, GREDA argues that it will stimulate demand for properties. Increased demand would not only benefit property developers but also boost related industries such as construction, finance, and home improvement sectors.

3. Economic Growth: The real estate sector has a multiplier effect on the economy. When the sector thrives, it creates jobs and stimulates economic activities. Removing the VAT could lead to a boom in the real estate market, which in turn would contribute to overall economic growth. GREDA posits that this move would result in more investments in the sector, both from local and international investors.

4. Competitiveness: In the global real estate market, competitiveness is key. The high VAT rate on immovable properties places Ghana at a disadvantage compared to other countries in the region where the tax burden is lower. By removing the VAT, Ghana could become a more attractive destination for real estate investment, enhancing its competitive edge in the region.

5. Revenue Neutrality: GREDA contends that the removal of the VAT may not necessarily result in a significant loss of revenue for the government. Increased activity in the real estate market could lead to higher overall tax revenues from other sources such as property taxes, income taxes from new jobs created, and corporate taxes from thriving businesses.

 Potential Outcomes of VAT Removal

1. Increased Homeownership: If the VAT is removed, the immediate effect would likely be a reduction in the cost of purchasing homes. This would make homeownership more attainable for a larger segment of the population. Increased homeownership rates can lead to greater social stability and economic security for families.

2. Boost in Real Estate Development: Developers would likely see an increase in demand for new properties, prompting them to invest in more projects. This could lead to a surge in the development of residential, commercial, and industrial properties, addressing the housing deficit and modernizing urban infrastructure.

3. Job Creation: The ripple effect of a thriving real estate sector would be seen in job creation. From construction workers to real estate agents, the demand for skilled and unskilled labor would rise, helping to reduce unemployment rates and improve living standards.

4. Economic Diversification: A robust real estate market can contribute to economic diversification. By attracting both local and foreign investors, the sector can reduce the economy's reliance on traditional sectors like agriculture and mining, leading to a more balanced and resilient economic structure.

5. Improved Urban Planning: With increased investments, there could be better urban planning and development. This could lead to the creation of more sustainable and livable cities with improved infrastructure, public amenities, and services.

6. Challenges and Considerations: While the removal of the VAT on immovable properties presents many potential benefits, it is not without challenges. The government would need to find alternative sources of revenue to make up for the potential shortfall. Additionally, there must be measures in place to prevent any unintended consequences, such as speculation or a property bubble.

The call by the Ghana Real Estate Developers Association (GREDA) for the removal of the 17.5% VAT on immovable properties is a significant plea that highlights the current challenges faced by the real estate sector in Ghana. By addressing these issues, the government has the opportunity to stimulate economic growth, make housing more affordable, and attract more investment. While there are challenges to consider, the potential benefits of removing this tax could far outweigh the drawbacks, leading to a more vibrant and sustainable real estate market in Ghana.