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How new VAT law’ll affect cost of building materials

Although, cost of building materials rise often without major developments in the economy, the planned increased of Value Added Tax by the government is enough reason for building material prices to spike. Now that the Federal Government has decided to increase value added tax (VAT) on some goods, it would be difficult to isolate its effect outside the bulding materials sector. Of course, it will include cost of building materials and houses in the property market. Today for instance cost of accommodation is high because the cost of building materials is correspondingly high. This is why the decision by Federal Government to unilaterally increase value added tax on goods for purposes of raising additional revenue will amount to double taxation that will increase hardship of the people.

The Federal Government recently proposed an increase of the Valued Added Tax, VAT from five per cent to seven point two per cent. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed who disclosed this while briefing State House Correspondents after one of the Federal Executive Council, (FEC) meeting presided over by President Muhammadu Buhari in Abuja. The Federal Government had earlier, via a Circular dated 7 February 2019, revised the excise rate on products classified under tariff heading (TH) 22.06. These products included but not limited to fermented beverages like Cider, Perry, Mead, Sake among others. Mixture of fermented beverages and non-alcoholic beverages not elsewhere specified or included. But aside this, things that pertain to real estate sector are also involved.

Without considering the consequences on the poor masses, the Federal Government of Nigeria (FGN) approved and ordered the implementation of the 2019 Fiscal Policy Measure (2019 FPM), effective 1 July 2019. 2019 FPM replaces 2018 FPM, which had been in force since 27 July 2018. An in-depth analysis of the 2019 FPM reveals that government remains committed to its plan to encourage investment in industries deemed critical to its economic growth agenda; as well as discourage importation and consumption of certain items. So, creating more investment opportunities that can employ more people whose taxes and pensions are deducted from source is considered as something that would pay government better.

Nonetheless, government should also know that people who are struggling to make ends meet on their own should be encouraged otherwise, will be indirectly encouraging social vices. Increasing employment is like one who sell his goods wholesale with regular traffic of income. It is better than one who sells retail with high price. The person who is into wholesale, sells with little gains yet makes huge profits because of number according to Mrs. Angela Odubanjo who is a real estate agent. Government benchmarking taxation on importation being talked about here doesn’t preclude building materials that are not produced here in Nigeria but imported from foreign countries. Cost of building materials in Nigeria as at 2018 vary, although it is higher by 15 per cent than imported building materials.

Nigerians overseas can benefit from the market survey to estimate a budget for construction cost at home. This market survey provides details in relation to brand, size, and price which can be used to make adequate planning towards upcoming building projects in the country by being aware of the cost of building materials in Nigeria as at 2019. As is always the character of many Nigerians, the moment government pronounces such increase, they will hike the price of even the ones they bought many months back but were not sold. This makes prices of goods not stable. This instability eventually results in the total cost of erecting a building. With that, those who had wanted to build their homes will be discouraged and the housing deficits will continue and the list continues. This list includes the major building materials of a broad category, brand, size, and cost. This survey of building materials will serve as a useful tool for real estate investors, potential home builders, and professionals in the housing sectors alike. But the list can make less meaning now with the new policy in taxation.

Many of the policies promulgated by government agencies are anti – people yet because their interest is protected and not negatively affected, they do not bother.

But these days, people bother because despite the biting economic hardship in the country, the cost of building a house has continued to rise. Between October 2016 and April 2017, several building materials have become more expensive than they used to be. In October 2016, it cost N2,500 to buy the ¼ white plywood board whereas, in April 2017, the same plywood was sold for N4,200 per unit.

The price has gone higher above 20 per cent unilaterally in 2018 and 2019, yet instead of fashioning means of reducing it, government is only busy increasing it. If the increase is as a result of the minimum wage, then it amounts to Greek’s gifts moreso, not everybody has his salary increased. Any policy of government that is not public friendly is draconian and should not be supported. Mr. Chikezie Ohanusi, an Abuja based developer kicked against the tax increase saying government should only tax those rich people that live in mansions and drive big cars. According to him, it is an act of wickedness to use the yardstick for both the rich and the poor.

As expected, this holds grave consequences for developers, the government, Nigerians planning to rent or buy property as well as other stakeholders. Industry experts have bared their minds on this topic variously even though government will hear it but will think other things. This hardship should not have been compounded by the introduction of VAT if there were industries that would pay the tax. So government should support and encourage manufacturing of local raw materials and industries because that is what will increase revenue generation in the country. If the government encourages those who are into manufacturing by providing them durable electricity, the ones that are needed but are not manufactured in the country will be reduced. In this case, if they are reduced, then the tax introduction will be justified. We cannot be crying and asking government for shelter and the only help government is rendering is to increase taxation. It shows government’s insensitivity to the plight of the citizenry.

Credit: Sunnewsonline

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