The tycoons of the real estate sector have proposed to the government to increase the valuation rates with the condition of reducing the tax rates proportionally.
According to his estimates, the Federal Revenue Board (FBR) could collect between Rs40 and Rs50 billion annually through this mechanism at a time when the tax machinery will have the task of achieving a gigantic collection target around Rs5.3 billion in difficult conditions. the rope and the scrutiny of the IMF program. “The real estate sector can play an important role in getting the economy out of the current financial crisis. “If the government decided to increase property valuation rates but did not lower the tax rates, it could cause a major disaster in this sector,” said Muhammad Ahsan Malik, General Secretary of the Association of Real Estate Consultants (RECA), while talking to The News here on Tuesday.
The government is considering different options to increase the collection of real estate taxes in the next budget for 2019-20. However, this sector has been facing difficulties due to undeclared income, since there was a difference between the valuation rate reported by the FBR and the real market value and the real estate want an exit to put their undeclared income in the documentation. One possibility could be to make use of the amnesty plan until June 30, 2019 and the real estate tycoons are suggesting to potential investors that they take advantage of this plan to launder their undeclared income.
Mohammad Ahsan Malik sent proposals to the Finance Adviser of Dr. Abdul Hafeez Shaikh, Minister of State for the Income Hammad Azhar and President FBR Shahbar Zaidi, but so far no one had bothered to respond, even in crucial tax proposals.
He stated that since the introduction of new FBR / DC tax rates and values in June 2016, the Pakistani real estate market is in the worst recession in history and has not only resulted in a reduction in revenues but has also destroyed the business of millions of people. Real estate agents from all over the country.
He proposed that the taxes on the sale and purchase of property under sections 236C and 236K be reduced, since the tax rate on the seller of property must be 1 percent of the real value, the purchases that make the statements must pay the 1 percent while those not declared Declarer must pay 2 percent. The deed of sale / registration fee must be set at a rate of 2%, of which 1% must be stamp duty and the remaining 1% must be registration fees.
He also requested the exemption under section 236-W of the income tax ordinance of 2001. Under this section, the FBR introduced a 3 per cent on the difference in property value reported by FBR and the actual market value to which the property must be registered by the authority registry.
“We recommend that properties purchased in amounts received from abroad through the appropriate banking channel and the white source of funds (declared in the returns) must be exempt from the applicability of the voluntary amnesty plan under section 236W of the Tax Ordinance. the Rent, 2001 “. said and required to eliminate the upper limit of 236-W and allow to take advantage of this section up to any limit.
He proposed to increase the period of possession of the tax on capital gains from three years to 10 years. The government grants the declarant status to all Pakistanis abroad / non-resident Pakistanis. They can buy a property simply by providing NICOP or POC or foreign passport.
It is worth mentioning that the government has already cleared its position saying that the property tax is a provincial issue and to take any action the provinces will be involved.