'Young people, retirees can use tax cuts to acquire property'
Some of the recent tax reductions will apply to wide range of transactions, including the transfer of land, mortgages, loans and securities.
The reform of the Stamp Duty and reduction in Transfer Tax will enable young professionals and retired Jamaicans to acquire homes, according to Finance Minister Dr Nigel Clarke.
Speaking at a post-budget press briefing held at his Hero’s Circle-based ministry on Friday, Clarke said this demographic had, for decades, been hamstrung by the costs associated with buying or selling a property, but this would change with the recently announced reforms.
A day earlier, he announced a $14 billion stimulus package, which will see the government lose $10.3 billion in revenue from changes to Stamp Duty and Transfer Tax. Such taxes apply to a wide range of transactions, including the transfer of land, mortgages, loans and securities.
“We’ve lived through a Jamaica where we have had massive inflation over a period time, people who are elderly in the last 10 years or so, have had an unfortunate experience, whereby they don’t have the liquid resources for that kind of transaction environment. Just think of what that mobility means for young people coming up,” Clarke said.
“No country interested in economic activity can lock people in by high transaction costs,” Clarke added.
Finance Minister Dr Nigel Clarke made his maiden budget presentation on Thursday, March 7.
Effective April 1, Stamp duty and transfer tax, which are imposed on a wide variety of transactions are to be replaced by a $5,000 flat fee.
Additionally, ad valorem stamp duty on property is to be replaced with a $5,000 fee; Transfer tax on property is to be reduced from five per cent to two per cent and estate transfer tax: the exemption threshold of $100,000 is to be moved to $10 million.
Using his constituency of North West St Andrew as an example, Clarke said the reduction in taxes would particularly benefit retired Jamaicans who are seeking to downsize.
“I represent one of the constituencies in Jamaica with a large proportion of retired Jamaicans. And many of them would love to downsize and buy a townhouse or an apartment. But what sense does it make if you are going to give up a large amount of money and when you buy again you lose another per cent,” he said.
Finance Minister Clarke also reasoned that the changes would facilitate the emergence of sub-sectors within the real estate industry.
“It will certainly facilitate new industries. It will facilitate things that we can’t even envision. People are now free to transact, to do business,” Clarke said.
President of the Realtors of Association of Jamaica (RAJ) Andrew Jackson agreed, noting that the reduction in Transfer Tax and Stamp Duty would “stimulate real estate transactions moving forward.”
When asked whether the tax cuts would give rise to the house flipping market, James said the “possibility exists”.
“Because of the high cost of transferring property, a lot of persons were hesitant. Now with the government taking two per cent out of it, you are more motivated to sell and move on to another project,” James said.
Flipping refers to a strategy of purchasing properties and selling them on a short time frame for a profit.
James, however, suggested that there may be delays at the Stamp Office arising from an increase in demand and supply of houses that would come with the tax cuts.
“I don’t know if they have enough manpower, that’s often the cry. So when documents go there, and when valuators need to go and investigate, it may take a little time for persons get their document,” James said.
“But I’m sure the government will bear that in mind and put things in place,” he added.