Published:Friday | June 3, 2016
The Realtors Association of Jamaica (RAJ) is already pressing for transfer tax and stamp duty to be rolled back as soon as bailout agreement with the International Monetary Fund (IMF) comes to an end next year.
Transfer tax now stands at five per cent and stamp duty at four per cent, each of which were raised by a percentage point since the signing of the Jamaica-IMF Extended Fund Facility agreement in 2013.
“Take it back to where it was before IMF and then we can have discussions on where to go from there,” said RAJ President Edwin Wint.
He argues that with lower taxes, the volume of real estate transactions will increase and translate to economic growth. The current rates, he said, act as a disincentive for some real estate transactions due to the cost.
The realtors have been successful in the past in their lobby against the taxes, which they got reduced in two phases about seven years ago.
“However, in order to meet the conditions of the IMF programme two years ago, the Government reversed some of the gain which were made,” Wint said.
Aims to get rid of taxes
The association is pitching right now for a reduction, but its aim is to get rid of the
real estate taxes altogether, eventually, the RAJ president suggested.
Typically, in real estate transactions, transfer tax is the seller’s cost and the stamp duty and registration is shared 50/50 between seller and purchaser.
The transfer tax rate was previously reduced from 7.5 per cent to four per cent and stamp duty on real estate from approximately five and a half per cent to three per cent, since May 2008, but were raised to their current rates post-2013.
The RAJ head said, based on anecdotal evidence, transaction volumes increased when the rates were reduced. Lower taxes will also spur tax compliance, he said.
“When the incidence of tax is considered to be at a fair level, you will get better compliance. When it is considered to be too high, people undervalue the transaction in order to save,” said Wint, who also heads La Maison Property Services Limited.
Business would also pick up in the secondary real estate market, he adds.
“For example, you want to buy a little distressed/foreclosure property in Portmore, fix it up and sell it back; you can’t do that with this high transfer tax. You would have paid the transfer to buy it and then you are going to have to pay it again to sell it. So it makes the conveyance cost for the transaction too high,” he reasoned.
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