The Construction Industry Federation (CIF) has expressed its disappointment that no changes were made to construction VAT in the Budget, saying it will encourage black economy activity.  The CIF had sought a reduction similar to that brought in for the tourism sector to be introduced to help encourage activity in the sector.

“It is very disappointing that the Government has not reduced the level of VAT on the construction sector,” said CIF Director General Tom Parlon.  “We believe this would have had a dramatic impact on construction costs and help boost activity in the sector.

“The Government has already noted the impact the reduction in VAT has had on the tourism sector.  It has helped make that market more competitive and encouraged activity.  We believe that if the Government had reduced construction VAT from 13.5% to 9% it would have had a similar impact on the construction industry.  The Government says they are committed to helping our industry but they have failed to take a step that would have had a discernible impact on a struggling sector.

“Reducing VAT would have helped stamp out black economy activity in the construction industry with many black economy operators not recognizing the VAT rates and making the proper returns.  This is one of the major areas where they are able to undercut legitimate operators.  Lowering the VAT rate would have helped address that, making legitimate operators more competitive.

“Unfortunately the lack of action by the Government in this regard is only likely to drive more activity into the black economy.  The VAT status quo is only going to damage our industry,” Mr. Parlon concluded.