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MULTIMEDIA
May 27, 2012
 
 
 
 
 
 

Lifted KDV refund could harm construction sector

An anticipated regulation to abolish KDV refunds on houses below 150 square meters is feared to cause company bankruptcies in the market.
13 January 2010 / İBRAHIM BALTA, İSTANBUL
Turkish construction sector representatives are concerned that an anticipated regulation to abolish value-added tax (KDV) refunds on homes measuring less than 150 square meters in area would deal a major blow to the sector, leading many companies to the brink of collapse.

The recently drafted legislation, which foresees the abolishment of KDV refunds on houses below 150 square meters, is expected to be sent to Parliament soon. Construction firms in Turkey pay 18 percent KDV on purchases of construction materials. The companies, however, sell houses measuring less than 150 square meters with only 1 percent KDV, receiving a 17 percent KDV refund from the state for the sale of these homes.

Reacting to the anticipated regulation, representatives of the Turkish construction industry say it could increase house prices by at least 15 percent, while many companies could go bankrupt. According to company representatives, such a regulation will mean nothing but punishment for the construction sector, which they identify as one of the driving forces behind the country’s economy.

“We expect the government to introduce further incentives for our sector instead of placing extra burdens on us,” Ali Ağaoğlu, the head of the Ağaoğlu Group asserts. Pointing out that the sector contributes to employment as well, Ağaoğlu thinks companies would have to dismiss employees under the burden of annulment of the tax refund. He underlined that construction projects currently under way and future projects could be affected negatively in wake of the new tax regulation. Ağaoğlu thinks more companies will refrain from starting housing projects for customers from lower income brackets following its introduction.

Artaş İnşaat’s executive board manager, Süleyman Çetinsaya, suggested that the construction sector would find it difficult to cope with problems the new regulation could create. He said they did not expect the regulation to apply to projects that are already in progress.

According to Dumankaya İnşaat executive board member Ali Dumankaya, some 100 construction companies received KDV refunds from the state, and these firms contribute to the registered economy. The abolishment of KDV refunds could increase unregistered activities, he argues, adding, “Not only companies, but also customers will be negatively affected by such a regulation.” He said the Turkish construction sector has a bright future and that the government should refrain from implementing rules that could hinder further growth and improvement in the sector.

Süleyman Varlıbaş, head of Varlıbaş Holding, agreed, saying, “It is not logical to introduce such a regulation in a market environment where people already face difficulties when buying a new house.”

Yeşil İnşaat CEO Engin Yeşil says they would consider appealing to the court if the anticipated regulation includes projects still under way. “Some 90 percent of sales in the sector are from houses under 150 square meters. We need to encourage the sector with new incentives, not block its way.” Yeşil said companies might commence fewer projects than they had planned for this year and that this is not good for the economy.

Sinpaş GYO CEO Ömer Faruk Çelik thinks the government will not introduce the regulation, noting that if they do, the sector will face some “catastrophic results.”
 
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© Feza Gazetecilik A.Ş. 2007, Ahmet Taner Kışlalı Cad. No: 6, Bahçelievler - İstanbul 34194 Turkey, +90 (212) 454 1454, +90 (212) 454 1497(fax)