Property developers laud suspension of capital gains tax hike

Real estate and property developers expressed support for the Department of Finance’s (DOF) plan to withdraw a proposal to increase the capital gains tax (CGT) rate, calling it a positive step toward protecting housing affordability and investment stability.

Finance Secretary Ralph Recto recently informed Congress of the agency’s decision to retract proposed amendments to the Capital Markets Efficiency Promotion Act (CMEPA), which included raising the CGT rate to 10% from 6%.

Recto cited strong tax revenue growth and the country’s improved fiscal position as grounds for the withdrawal.

The DOF’s reversal comes after months of pushback from key real estate and housing groups, including the Chamber of Real Estate and Builders’ Associations Inc. (CREBA), the Subdivision and Housing Developers Association (SHDA) and the National Real Estate Association (NREA).

The groups warned that the proposed tax hike would drive up land and housing costs, limit access to affordable housing and slow down economic activity in construction and real property development.

“Land is fundamental to all economic activity. Any additional tax on land transactions would ripple through the entire economy, resulting in higher prices, stalled investments, and job losses,” said CREBA national president Noel Toti Cariño.

The groups warned that increasing the CGT, which is a pass-on tax, would ultimately lead to higher housing production costs, pricing out low and middle-income buyers who comprise the bulk of the country’s housing backlog.

They also cautioned that developers may be forced to pull back on affordable housing projects, reducing supply at a time when demand remains high.

CREBA, SHDA and NREA said in a position paper that higher CGT rates would discourage investments and inflate land acquisition costs, with consequences extending to infrastructure development, consumer goods and employment.

Cariño said the industry supports the DOF’s intent to explore alternative, non-tax revenue sources and urged policymakers to conduct a more comprehensive cost-benefit analysis before introducing fiscal measures that could impact housing and development.

“The estimated P300 billion in revenue over five years may not justify the long-term economic disruption it would bring,” he said.