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April 9, 2019

Centre, Punjab, KP agree to jack up property valuation

National

April 9, 2019

ISLAMABAD: The Centre, Punjab and KP, where PTI is ruling over, have agreed in principle to jack up valuation rates of property and then reduce tax rates at federal and provincial levels from next fiscal year, The News has learnt.

The Center and all four provinces are also making efforts to sign Memorandum of Understanding (MoU) for devising a mechanism for collection of General Sales Tax (GST) on goods and services in harmonised manner. The GST on goods is the domain of the Center while on services it falls into jurisdiction of the provinces under 1973 constitutional arrangements.

“We are also proposing strict enforcement steps through proposed amendment in the tax laws where the FBR will be empowered to arrest any tax evaders on the pattern of NAB laws,” official sources in FBR confirmed to The News here on Monday.

However, Finance Ministry’s Road Map for Stability and Growth Framework released on Monday night states that tax policy has to balance the revenue objective with equity and growth objectives. Presently tax policy has a predominant revenue focus and as such is likely to create distortions in the economy which can adversely affect the growth and equity objectives.

In addition, even the revenue objective is compromised by large scale exemptions. To correct this shortcoming, the government intends the following: (i) Enact a law to ensure that no tax exemption is allowed through law or notification without an estimate of its cost independently by the tax department as well as the concerned ministry. Such cost will be made public before notification of the exemption. (ii) Review all existing exemptions, with the purpose of eliminating as many of those as possible. Even if an exemption is to be retained its cost will be determined and made public. Ministry of Finance to publish annually a statement of tax expenditures to show how much revenue is being foregone due to exemptions. (iii) Ensure that all exemptions, existing or newly proposed, will have a sunset clause (ideally not more than 5 years).

(iv) Publish a list of all government owned, quasi-government and government-linked enterprises availing tax exemption/concession in any way along with quantification of the tax expenditure. In addition, a plan be prepared for phasing out of these concessions.

(v) Withdraw FBR powers to issue SROs to grant exemptions. This power will vest only with the Parliament. (vi) Ensure that all non-procedural existing SROs will expire at the end of the fiscal year. Steps taken over the last two years to incorporate all exemptions granted through SROs to be made part of the body of law. Real estate sector: Since the federal government collects tax on income from property and provincial and local governments collect property and transaction tax on immovable property, all parties have an interest in proper documentation and valuation of property.

The government intends to pursue a coordinated approach to taxation and valuation of the real estate sector in a way to collect optimum revenue from it without discouraging investment.

Withholding taxes become regressive if people who are not liable to income taxes and/or if firms treat them as consumption taxes and are generally passed them on to the consumers, badly impacting the progressivity of the tax. As such, the tax needs some fundamental reforms. As a first step, the government intends to discontinue a large number of low yielding withholding taxes in the next year’s budget, it concluded.

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