ISLAMABAD: The Federal Board of Revenue (FBR) and property dealers on Thursday remained unable to strike agreement on reconciled determination of fair market value of property for three major cities mainly for Karachi, Islamabad and Lahore, however, both sides decided to continue parleys for striking agreement on Friday (today).
The fair market value for three main cities acceptable to both the sides has become major stumbling block in the way for evolving consensus between the two sides. But the FPCCI President Abdul Rauf Alam said that both the sides would evolve consensus on fair market value on Friday (today).
However, huge differences still exists in determination of fair market value separately worked out by FBR and property dealers in case of three major cities out of total 21 especially for Karachi where declared official value was less than 10 to 15 times compared with fair market value and in some instances the gap widened up to 70 to 100 times depending on location of posh areas of metropolitan areas of Karachi.
The fair market value if agreed by the both sides would be notified by the FBR which could go up by 4 to 5 times.
“We have asked the property sector representatives to come up with fair market value and not come up with wish lists. First the fair market value should be determined for major cities then future roadmap will be devised for jacking up rates in accordance with ground realities,” Special Assistant to PM on Revenues Haroon Akhtar Khan told The News here on Thursday.
“The parleys are underway and it is hoped that both the sides will evolve consensus on agreement related to fair market value within this week. After agreement, the government will come up with comprehensive package,” FBR Chairman Nisar Muhammad Khan told a selected group of reporters after holding hours long meeting with representatives of property, builders and FPCCI’s leaders here at Board’s headquarters on Thursday.
There was no major difference among the FBR and property dealers in case of 18 cities where there was difference in the range of 35 percent. But in case of major cities especially for Karachi and Islamabad, the gap widened up to 60 to 100 times for some areas.
Now the FBR wants to place new market rates after striking agreement with the property dealers by replacing DC rates. The tax is collected on the basis of stamp duty and then withholding tax on sale and purchase of property and gains tax with different rates for filers and non filers is imposed. With determination of fair market value, the taxes imposed on property will be increased and the FBR has estimated that they can fetch Rs26 to Rs30 billion during the current fiscal year.
According to FBR’s working, the annual transactions on property stood at Rs6,000 to Rs7,000 billion per annum and the FBR’s collection on the basis of collectors’ stamp duty showed that the property transactions were continued in the market as in first 28 days of July and the FBR’s collection on selling and purchasing of property did not decline significantly rather it increased in case of selling property and slightly decreased by Rs10 to Rs15 million in case of purchasing property.
On the basis of fair market value worked out by the FBR, the valuators endorsed 80 percent work done by the FBR as correct and in accordance with market value in three major cities, 15 percent area declared under- valued done by the FBR and 5 percent area over valued by the FBR staff.
Ongoing parleys among FBR and property, builders and business tycoons: The FBR and property tycoons which were scheduled to kick-start meeting on Thursday at 11 am but the meeting started at 3 pm. The FBR’s team presented its working and asked property tycoons to present their fair market value. Only four to five representatives presented their figures which were far less than the fair value worked out by the FBR.
The fair market value was much less in case of Karachi areas so the meeting decided to come up with fair market value by reconciling figures among the FBR and property tycoons till Friday.
FBR’s views: The FBR’s high-ups argued that the purpose of putting real estate into tax net was not raising money only but it aimed at documentation of black economy as all undocumented money was being invested into this sector.
The FBR had already imposed withholding tax and gains tax for filers and non filers with different rates. But the mechanism of stamp duty on the basis of which the FBR’s taxes are calculated and charged are much less than existing market value.
In case of concealment of income, the FBR is empowered to impose tax at rate of 35 percent in case of Rs 10 millions plot of property and with imposition of penalty the tax amount could go up to Rs 7 million out of Rs 10 million plot.
