NA body approves amnesty scheme suggestions for real estate

ISLAMABAD: The National Assembly’s Standing Committee on Finance has approved the recommendations of a subcommittee to give yet another tax amnesty to whiten billions of rupees black money in the real estate sector.

According to the recommendations, nobody would be asked about the sources of income over payment of 3% additional tax on the difference of amount between the real price of the immovable property and the one fixed by the FBR under the fair market rates.

Another additional tax at the rate of one per cent would be charged from both seller and buyer under the heads of Withholding Tax, Advance Tax and Capital Gain Tax. According to the FBR Evaluation Table, the current rate of Capital Gain Tax ranges from 3 to 6%.

The committee has recommended charging one per cent tax either on the FBR-fixed rate or the real price of the property, whatever is higher. That means the committee has recommended lowering the tax rate on higher prices of properties.

The committee has also recommended correction in rates of the real estate evaluated and fixed ‘higher’ by the FBR. The standing committee meeting was held with Chairman Qaiser Ahmad Sheikh in the chair. The recommendations would be made part of the Income Tax Ordinance 2001 Amendment Bill, and presented in the National Assembly for its approval. However, the FBR has shown disagreement with the recommendations of the committee. The FBR chairman has said that the committee has the right to give suggestions, but the Federal Board of Revenue did not agree with them. He said some of the property rates had already been approved by parliament under the Finance Act. He said that still the FBR-fixed rates are far less than the real rates of properties. He said the ordinance authorised the FBR to evaluate the rates of properties, and the recommendations of the subcommittee did not fall in the ambit of the ordinance.

Mannan said when the evaluation rates of properties went up, people stopped purchasing properties, which resulted in a slump in market. He said it is not black money but foreign exchange. He said DCOs have also doubled the rates of immoveable properties.

A committee member Rashid Godail said that after the passage of 18th Amendment, evaluation of properties is a provincial matter and the federal government should not interfere in it. He said that if no relief was provided to the real estate sector, the money would be invested in offshore companies. The capital would fly to Dubai, Panama and Bahamas, he added.

He said the subcommittee had held discussions in detail with the representatives of the Real Estate and Association of Builders and Developers and then finalised the recommendations. ParliamentarysSecretary for finance  said that if the government would make strict laws for the real estate sector, then no poor person would ever be able to build his house. He said higher tax on real estate would not affect any other sector, and DCOs have also not doubled the rates of immoveable properties.