FBR chief resolves to check tax evasion

ISLAMABAD: Newly appointed FBR Chairman Nisar Khan has said that it is on his agenda to check annual tax evasion of estimated hundreds of billions of rupees and whitening of black money worth trillions of rupees through unabated undervalued sales and purchases of properties throughout the country.
Talking to The News, the FBR chairman admitted that the huge gap between the actual value and the declared value of the properties, sold every day, causes colossal loss to government revenue besides letting people to whiten their black money. He said that the present deputy commissioner rates of properties are ridiculously low, which allow the people to evade tax.
Nisar Khan though did not offer his estimates of this huge loss, he resolved to tackle this problem to improve revenue collection. “At this point of time, I can’t say what strategy we will adopt to check this but one thing is sure that we have to do something seriously,” he said.
FBR sources say that their estimation suggests that due to present practice of extremely low official rates of properties as against the actual prices of the real estate, annually tax worth hundreds of billions of rupees is evaded besides allowing whitening of trillions of rupees black money.
While Pakistan direly needs to broaden its tax base by making the rich to pay the tax, the concerned federal and provincial authorities are graciously allowing the sale and purchase of properties, both commercial and residential, on extremely undervalued rates to the benefit of tax evaders.
This is generally accepted practice of all the provincial registration offices as well as the CDA, DHA and other housing societies. Most of these sales and purchased are based on official rates, also known as DC (deputy commissioner) rates, which are far lower than the actual market prices of these properties.
As reflected by The News in a recent story on the subject, during the last two budget preparation exercises, the FBR had proposed the enactment of “Pre-emption Law” to check this huge corruption of tax evasion and whitening of black money. However, the powerful lobbies did not let it happen.
This shady affair deprives the government from actual CVT and withholding tax, which if calculated on original price, goes into hundreds of billions of rupees every year. Such dealings, which have the blessings of the federal and provincial authorities, give great opportunity to tax evaders and black money holders to whiten their money by investing more but showing much less on real estate.
In an ordinary sale of just one house in Islamabad, the government is deprived of over Rs1 million tax. For example, a CDA source said that generally the declared (by buyer) worth of Rs100 million house in Islamabad sector is around Rs30 million. This is done because of the fact that the maximum DC rate for one kanal of land in Islamabad is Rs9.6 million only.
The government imposes two percent CVT and two percent withholding tax (on non-filers) or one percent withholding tax (on tax payers). If a property worth Rs100 million is claimed to have been purchased for Rs50 million, it would help the buyer evade Rs2 million tax.
Former FBR spokesman had told this correspondent that in Sector F-6 and F-7 of Islamabad, the DC rate of one kanal plot is merely Rs10 million whereas the market price is around Rs100 million. In such cases of sales and purchases more than Rs3 million tax is evaded. Massive tax evasion is officially allowed in all parts of the country as has been reflected in The News earlier investigative story on the subject.