A 10 percent tax on new construction will make the recession worse
According to ISNA, Seyyed Mohsen Tabatabai Mazdabadi – Secretary of the Urban Economics Scientific Association and Vice President of the Urban Economics Scientific Association of Iran said:
In a situation where the housing market is still in recession, imposing a 10% tax on newly built buildings can worsen the situation more than before.
According to this regulation, the first transfer of buildings built by individuals in cities with a population of 100,000 people and above, in addition to the transfer tax subject to Article 59 of the Direct Taxes Law, in the case of legal entities, in compliance with Note (4) of Article 77 The said law
And in the case of natural persons, in accordance with the notes 2 and 4 of the last mentioned article, they are subject to tax on account at the rate of 10% based on the transaction value of the transferred property.
According to note 2 of the aforementioned article, the inclusion of the provisions of this article regarding the construction and sale of buildings by natural persons depends on the fact that no more than three years have passed since the date of issuance of the completion certificate, and according to note 4, cities with a population of less than 100,000 people are exempt from the ruling. The provisions of this article are excluded.
Pointing out that the effort of the tax organization to increase the country’s income is good, but the ways to earn money should be in line with the economic requirements, Tabatabai considered the direct target of this regulation to be mass builders and private builders of housing and said:
Of course, we must keep in mind that ultimately this tax will be paid from the consumer’s pocket, because the builders add this additional tax on the original housing price.
In the last six months of last year, the sum of private sector investments in new buildings built in cities was 32,616,000 billion tomans, which shows a 16.5% decrease compared to the same period of 2014.
Also, in the first six months of last year, 45 thousand 151 units of all the buildings started to be built were residential, which shows a decrease of 11.6% compared to the same period last year.
In the last six months of the year, 5,060 residential buildings have started to be built in Tehran, which has decreased by more than 20% compared to the previous period.
In the first half of last year, more than 58,000 buildings were completed in cities by the private sector at a cost of 26,560 billion tomans, which shows a decrease of more than 25% compared to the same period in 2014.
Housing, despite all the government’s promises, such as increasing the portfolio of facilities, has not been able to completely get out of the recession, in this situation, it does not seem logical to impose new taxes on housing construction.
What exists as the main problem in the field of housing is the huge gap between the level of wages and savings of households with the price of land and housing.
Last year, more than 30 percent of Iranian households lived in rented houses, which is a four percent increase compared to 2010.
In 2014, housing accounted for more than 42% of urban household expenses in the combination of annual non-food expenses.
Tabatabai also pointed to the statistics of 2,587,000 vacant houses last year and said:
The solution to the housing problem is to improve other income indicators of the country and consequently to increase the per capita income of households and then to increase the support umbrella of the government with low-interest and long-term facilities.