Pressure and Lobbying Pay Off: VAT Increase on Real Estate Postponed Again
The pressure and lobbying exerted by real estate developers have finally paid off, once again. The implementation of a 19% Value-Added Tax (VAT) rate, up from the current 13%, will be delayed until 2026 instead of 2025. This marks the fourth time this decision has been postponed. The increase was initially decided upon in the 2018 finance law.
While this may be good news for the sector and consumers in general, it's time to seriously question this measure. How long will we continue to put off this decision?
We need to face the problem. In reality, increasing the VAT by 6 percentage points is not the root of the current market blockage. In our opinion, there are two major handicaps.
The first is the prices practiced by developers, which exceed the average Tunisian's purchasing power, who, let's recall, have an average salary of 924 TND, according to INS figures. With an average interest rate exceeding 11% over the first six months of 2024 applied to housing credits, it's difficult to strike a balance between the cost of daily living and the burden of monthly payments.
The second is the tax risk. Previously, those who managed to accumulate wealth outside the eyes of the tax administration, either through parallel commerce or by underreporting their income, invested in real estate. Now, every acquisition is scrutinized by the administration, which has led to a decline in transaction volumes. It turns out that this category of people was driving the market. Their withdrawal has created a huge number of unsold properties and pushed prices upward. The apartment that finds a buyer must ensure the margin of two or three apartments that remain closed.
Without finding a solution to this second point, postponing or applying the new VAT rate will serve no purpose. To those who will listen...
