Tax collection on property transactions increases to Rs7.3bln

ISLAMABAD: The Federal Board of Revenue’s (FBR) tax collection from property transactions almost doubled since the introduction of new real estate valuation tables, an official said on Monday. 

Rehmatullah Khan Wazir, member Inland Revenue Policy of FBR, said the tax authorities collected Rs7.3 billion in taxes on property transactions between 1 July, 2016 and 24 January as compared to Rs4.2 billion in the corresponding period a year earlier.  Wazir said there were 116,000 real estate transactions during this period as compared to 106,000 previously.

“There are still a few anomalies in the valuation tables, which will be removed,” he said at a meeting attended by members of the National Assembly Standing Committee on Finance and officials of Pakistan Real Estate Investment Forum (PREIF) to discuss the anomalies in the latest valuation system.

The FBR, under the Finance Act, 2016, set new market-based property values, which are higher than the values fixed by provincial authorities. The valuations are for the purpose of capital gains tax deduction. The new valuations were implemented from July 31, 2016.

PREIF, in a statement, urged the federal government and FBR’s officials to remove anomalies in the FBR-notified valuation tables, “which are acting as deterrents in the momentum of real estate activity.” President PREIF Shaban Elahi praised the government and FBR for bringing amendments into the Income Tax Ordinance 2001. “In the post-amendment scenario, real estate activities in the country are picking up and local as well as overseas investor confidence is rebuilding.”

Elahi said the FBR notified property valuation tables for all areas nationwide after the consultation with the stakeholders. “However, there are some glaring valuation anomalies.” He said valuations in DHA City Karachi, SITE Area Karachi, Anmol Cooperative Society Lahore, DHA Valley Islamabad and some areas of Peshawar are ‘unnaturally’ high. 

“This is increasing the transaction cost disproportionately and thereby discouraging investment in these areas,” he added. “Tax revenue from these areas can substantially be increased if these valuation anomalies are resolved.”

Lawmaker Mian Abdul Mannan agreed. Mannan said valuations in some areas in Faisalabad are ‘too high’ and need to be corrected.  Qaiser Ahmed Sheikh, chairman of the finance committee, said that he was aware about the anomalies in SITE industrial area. He supported the PREIF stance. Sheikh directed the formation of a four-member sub-committee to look into the matter and find out the solution in consultation with all stakeholders.