Property tax collection sharply falls 20 percent in July-April

KARACHI: Property tax collection by provinces sharply fell 20 percent to Rs4.81 billion during the first 10 months of the outgoing fiscal year of 2017/18 as the previous government withdrew the revised-up valuation tables for real estate sector at the end of its tenure, officials said on Friday.

Provincial property tax collection amounted to Rs6.01 billion in the corresponding period of the last fiscal year, the finance ministry’s data showed.

Property tax collected by Punjab declined 31.62 percent to Rs2.66 billion in the July-April period. The collection stood at Rs3.88 billion in the corresponding period of the last fiscal year. Similarly, the property tax collection by Sindh fell 3.85 percent to Rs1.45 billion. Other two provinces: Khyber Pakhtunkhwa and Balochistan, having lower volume of transactions, registered increase in collection by 15 percent and nine percent, respectively.

The previous government of Pakistan Muslim League (Nawaz) had reversed the income tax regime on properties after implementing the values notified by the Federal Board of Revenue (FBR) for almost two years in August 2016. The FBR values were implemented for more than 20 major cities. The federal government’s valuation also jacked up the provincial tax collection due to higher declaration by buyers and sellers. There was then used to be three different property rates: one for DC rate collection and another for withholding tax, whereas market price was much above the two.

The government’s initiative was to promote documentation of economy and discourage misreporting in the real estate business. The then finance minister Ishaq Dar and all the stakeholders had agreed on the fresh values and it was agreed to bring them close to market rates.

In December 2017, Miftah Ismail was appointed as Advisor to Prime Minister on Finance and Economic Affairs and soon after assuming the charge Miftah, however, started criticising the property valuations.

Sources said though the withdrawal was announced in the next budget, it was unofficially implemented last year. The federal budget for the fiscal year 2018/19 abolished the property valuation tables and announced the discontinuation of withholding tax collection from July 1.

The federal government implemented one percent income tax on fair market value of property applicable for tax year 2019 and onwards. It also announced to establish a directorate to assess the property transactions at fair market values and take over the properties whose values are understated.

The government also urged the provincial government to abolish the deputy commissioner (DC) rates on property and bring the tax at par with the federal level. The provincial governments, in their budgets for the next fiscal year, had not announced abolishing the DC values.

Tax experts said the old taxation system on properties was revived since the provincial governments decided to perpetuate the DC values of immovable properties.