SINGAPORE - A flat is about to be sold, and both sides are happy with the price.
But right at the last minute, the seller - who is supposed to pay tax on the property agent's commission - refuses to do so, bringing the deal to a standstill.
The only way out, agents say, is to absorb the goods and services tax (GST). Increasing numbers of them have been taking this step. Now, the agents are urging regulators to take a stronger stand by forcing consumers to pay up.
However, the Council for Estate Agencies (CEA) says it cannot mandate this as the tax is dictated by law, and it is up to the firms to decide whether or not to absorb it.
At the moment, the Government levies 7 per cent GST on an agent's commission on the sale or rental of a property.
About six in 10 sellers haggle over the levy, twice as many as five years ago, say industry observers.
They attribute this to rising property prices, which mean consumers are faced with paying higher commissions and therefore, higher taxes. Ms Sally Siew, 38, told The Straits Times that the issue lies in the profit agents already make.
"They are already earning such a tidy sum when the deal goes through," added the marketing manager, who sold a private property last year. "A small tax is a meagre amount in comparison."
Commission rates are negotiable, and can be up to 2 per cent for a property being sold. On a $1 million home, GST works out to $1,400 for a $20,000 fee.
Other consumers say it is the agents who volunteer to absorb GST to ensure they close the deal.
"If two agents can get me the same deal for a property, it makes sense for me to opt for the cheaper one," said Mr James Wong, 33.
Institute of Estate Agents president Jeff Foo added: "The nub of the issue is this: If consumers can't negotiate when they go to an established restaurant or hotel, why are they allowed to do so for property transactions?"
Agent Jason Lim, 26, started an online petition last month asking the CEA to make it compulsory for sellers to pay up. So far, 400 members of the profession have signed it.
A spokesman for the council said that it does not have the power to mandate this payment, but consumers should check with their agents if GST is already factored into the commission. "Both parties should agree upfront on the fees and charges payable for the estate agency services rendered."
An Inland Revenue Authority of Singapore spokesman said it is up to the businesses to decide whether to absorb the tax. She added that none of them has lodged a complaint on the matter so far.
The levy on an agent's commission applies only if the property company is GST-registered.
Registration is required for larger firms such as ERA Realty, as their annual taxable turnover exceeds $1 million. But smaller firms with less profits can choose not to register, and so avoid the tax.
An estimated 75 per cent of the 30,000 property agents here have to collect taxes on behalf of the Government.
PropNex chief executive Mohamed Ismail said GST-registered businesses are larger, which means they are likely to have a wider network and support system.
"Commission is negotiable but taxes need to be paid by law," he said. "It will help if the authorities take a stronger stand."
Get a copy of The Straits Times or go to straitstimes.com for more stories.