VAT in the private home construction and renovation market
Source: https://www.construction.am
#vat #armenia #construction #economy #realestate
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.
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.
