Track: Engineering Economy, Education & Management

Abstract

The implementation of Value Added Tax (VAT) in Saudi Arabia took affect at the beginning of 2018, at a rate of 5% added on to all products and services inclusive of the housing sector. This action is an attempt to reform the existing tax revenues system with the aim to generate sufficient funds required for public expenditure projects. A consideration towards adding various economic factors such as depreciation to the tax revenues system could complement the process with tangible outcomes. Steering the directive actions to satisfy a larger segment of citizens in need to own property for self-use. The objective of this paper is to reflect on the potential positive impact of depreciation for mortgage buyers, on the total house unit cost, once added to a house. Where the value of land increases over time, the value of the house standing on it, depreciates over time reducing the overall house unit cost for mortgage buyers by 18 percent. Decreasing the minimum monthly salary criteria of customer segments complying with the debt burden ratio from the salary bracket of 22,000 Saudi Riyal or 5860 U.S. Dollars down to a lower monthly salary bracket of 18,605 Saudi Riyal or 4961 U.S. Dollars.