ECONOMY

VAT on new homes seen as a possible threat to demand

Greece’s Association of Building Constructors (EKKE) has warned of a slump in the housing market if the government goes ahead with its plans to introduce value-added tax (VAT) on new buildings as of January 1, 2006. «VAT application will lead to lower sales at least for the next three years. At a rate of 19 percent, construction costs for the big companies will be very high, particularly in view of conditions of lack of liquidity in the construction sector. I think the government’s expectations for bolstering public revenues by imposing VAT will be refuted, as it will result in a building slump,» EKKE Chairman Dimitris Kapsimalis told Kathimerini. The government is due to announce detailed plans today, but it is considered certain that couples buying their first-homes will be exempted from VAT. Kapsimalis welcomed the exemption, but added that it should be extended to single people and the maximum amount exempted should be doubled to 130,000 euros. Furthermore, he warned of a danger, under the new system, that bogus contractors will ask for VAT in advance and then disappear.