ISLAMABAD: Property sector tycoons have proposed to the government to jack up valuation rates with the condition to reduce tax rates proportionally.
According to their estimates, the Federal Board of Revenue (FBR) could collect Rs40 to Rs50 billion on annual basis through this mechanism at a time when the tax machinery will be tasked to achieve a gigantic collection target of around Rs5.3 trillion under the tight noose and scrutiny of the IMF programme. “The real estate sector can play major role to pull out economy from present financial crunch. If government decided to increase valuation rates of property but did not bring down tax rates it could cause great disaster to this sector,” Muhammad Ahsan Malik, General Secretary Real Estate Consultants Association (RECA), said while talking to The News here on Tuesday.
The government is mulling over different options to increase tax collection from the real estate in the upcoming budget for 2019-20. However, this sector has been facing difficulties on account of undeclared income as there was difference between valuation rate notified by the FBR and real market value and the real estate wants a way out to bring its undeclared income under documentation. One possibility could be availing the amnesty scheme till June 30, 2019 and the real estate tycoons are suggesting to potential investors to avail this scheme in order to whiten their undeclared income.
Mohammad Ahsan Malik sent out proposals to Adviser to PM on Finance Dr Abdul Hafeez Shaikh, Minister of State for Revenue Hammad Azhar and Chairman FBR Shahbar Zaidi but so far no one had bothered to respond even on crucial tax proposals.
He stated that ever since introduction of new tax rates and FBR/DC values in June 2016, the real estate market of Pakistan is under the worst recession of the history and has not only resulted in reduction of revenue but also destroyed the business of millions of realtors from across the country.
He proposed that the taxes on sale and purchase of property under section 236C and 236K should be slashed down as tax rate on seller of property should be brought at 1 percent of real value, the purchases who is filer should pay 1 percent while the non-filer should pay 2 percent. The sale deed/registry fee should be fixed at the rate of 2%out of which 1% should be stamp duty and remaining1% should be registration fees.
He also sought exemption under section 236-W of income Tax ordinance 2001. Under this section the FBR introduced 3 percent on the difference in the value of property notified by FBR and the real market value at which the property is to be registered by the registering authority.
“We recommend that the properties purchased out of amounts received from abroad through proper banking channel and white source of funds (declared in returns) should be exempted from the applicability of voluntary amnesty scheme under section 236W of the Income Tax Ordinance, 2001,” he said and demanded to remove the upper limit of 236-W and allow to avail this section up to any limit.
He proposed to increase the holding period for capital gains tax from three years to 10 years. The government give the status of filer to all overseas Pakistanis/non-resident Pakistanis. They can buy property by just providing NICOP or POC or foreign passport.
It is to be mentioned that the government has already cleared its stance saying that the property tax is a provincial subject and for taking any action the provinces will be involved.