Property valuation
ISLAMABAD: The Federal Board of Revenue (FBR) and property dealers are expected to strike a consensus on jacking up the DC rates up to 50 percent in one go during the upcoming round of parleys which will start todayat the Board’s headquarters.
For instance, if the existing official value of property stands at Rs10 million and its actual market value is Rs100 million, the official value will be jacked up by 40 percent to 50 percent. FBR Chairman Nisar Muhammad Khan, who is leaving for Dubai on Sunday for holding review talks with the IMF, will make all-out efforts to evolve consensus with property dealers during this round of talks.
On the request of property dealers and businessmen, the FBR increased number of cities from 18 to 21 for working out fair market value and now both sides would sit together to find out amicable solution on valuation of property acceptable to all sides.
The FBR has accomplished its homework to devise revised fair market value for total 21 cities and now the property dealers have been invited for discussing their valuation tables and reconcile with the FBR authorities. “We will make efforts to resolve this lingering issue within this week but it will depend upon possibility of evolving consensus on formula acceptable to all stakeholders,” said one top official.
The FBR’s commissioners and valuators have estimated that the fair market value of property in Karachi and Islamabad was higher by 10 to 12 times on average and in Lahore it was higher by 5 to 6 times compared to official DC rates for payment of taxation purposes.
Now the FBR has convened meeting with property dealers and businessmen on Thursday (today) where both the sides would exchange their separate valuation working and then efforts would be made to reconcile on any figure acceptable to both the parties.
The FBR’s working on valuation of property showed that the valuation difference ranged by 2 times to maximum 30 times depending on different parts of major cities such as in Karachi and Islamabad the average market price of property was higher by 10 to 12 times while this ratio stood at 5 to 6 times higher in case of Lahore.
Last week, both the sides agreed on introducing amnesty scheme for regularising past transactions of property where fixed tax in the range of 2 to 5 percent will be imposed but the source of income will not be questioned.
The government decided to abandon the valuation mechanism through State Bank of Pakistan valuators with this condition that the table of DC rates will be jacked up to bring it at par with fair market value.
According to proposal under consideration included that one time amnesty scheme may be introduced to declare the property at actual cost and pay taxes at 2 percent to 5 percent on the amount of difference between declared cost and actual cost.
Such differential amount may be added to declared assets after availing of such scheme and payment of taxes. Also, if the property is held for more than five years, no such taxes may be paid.
Another proposal is to jack up tables of DC rates for major 21 cities and subsequently for the whole Pakistan by coming with ranges of 2 to 12 depending on value of property for different parts of the country. In one city like Islamabad and Karachi, the range of valuation of property could be distributed maximum up to 12 to 15 depending on the price value of piece of land.
The sources said that the government would not back out from this tax on valuation of property as it would help plugging black economy. “The conservative estimates suggest that the FBR can collect at least over Rs30 billion with revised mechanism of valuation of property,” said the official.