As reported by The Telegraph, the British Royal Institution of Chartered Surveyors (RICS) says next month's Budget should slash the amount of VAT people pay on repair and maintenance work on their homes in an effort to boost the struggling construction sector. RICS argues that the VAT rise will encourage tax avoidance since more building jobs will be done by cash in hand which could put homeowners more at risk of getting tangled up with "cowboy builders". The impact of the new rate of the sales tax has the potential to cost up to 34,000 construction jobs by 2019, according to RICS' calculations. The demand was among those laid out by RICS in its pre-Budget submission to the Treasury, which aims to encourage growth in the housing and commercial property sectors. Mark Goodwin, director of external affairs at RICS, said: "This Budget provides the Government with a chance to encourage growth and innovation in construction and property, providing much needed jobs, tackling the housing shortage and ensuring that businesses have a continuing supply of high-quality premises." In Britain to struggle with VAT high percentage was launched a special coalition called Cut the VAT Coalition, that includes more than twenty professional institutions and public organizations. Cut the VAT Coalition believes, that reducing the VAT from 17.5% to 5%t for maintenance and home improvement work would help to create around 51,000 new jobs in the construction and property industry and improve the quality of housing in the UK. The 5% VAT on this works is also recommended by European directives (1999/85/EC; 2006/112/EC). Despite the struggle for VAT reduction, to fight against huge budget deficit for 2011, British Government raise the VAT for home improvements from 17.5% to 20%. But the RICS calculations and recommendations, which is the world's leading professional body for qualifications and standards in land, property and construction, now forcing government to take urgent tax relief actions already in March. In addition to all the difficulties in the UK economy, 2010 government figures reveal house building completions at lowest level for 88 years. Completions fell to their lowest level since 1923, just 102,570 homes were completed in England in 2010, down 13% on 2009.

We think these are just two main reasons which are enough to completely exclude the VAT from this market. 1. With the current lamentable condition of housing in Armenia (especially in Yerevan), where about 80% of the buildings are in a state of increased risk of destruction from possible strong earthquake, probability of which is quite high for today. Of course, there is a need to replace old, not earthquake-proof buildings to new, earthquake-resistant ones, at a maximum possible low price. Besides other measures, the step to reduce indirect taxes (VAT) could quite significantly shrink the cost of housing construction, and thereby reduce the bar for possible home acquisition. 2. The second major problem relates to the legal development of small and medium companies in construction field. The problem is, that construction companies (especially licensed, as by Armenian VAT law while obtaining construction license companies automatically become VAT payers) can not conclude legal and complete contracts for construction and renovation works for private housing, because legal contracts increase the construction cost almost by 50% (including VAT, social payments, income taxes an so on) compared with the costs of "shadow work force" illegally and freely operates in this market without paying any taxes. The current reality, of course, puts licensed companies in one field of unequal competition with the shadow construction market, and does not allow creating normal conditions for the legal development and prosperity of companies, as well as implementing qualified construction. The result is; today the huge part of this market is in shadow economy, companies can not legally develop, the quality of work done is rather poor, while State Budget doesn't get lots of money. And who benefits? Today, our goal is to seek our readers' opinions, either through a simple voting or your comments. Given the fact that shadow economy in housing construction and renovation different extent exists in many countries, even in well developed ones, it is also interesting to find out opinions and to receive comments from all over the world to know the situation regarding to the issue.