The Federal Board of Revenue is reluctant to revise the valuation tables for taxation of property in 18 major cities of the country.
The new property tables, which came into effect on July 31, 2016, were scheduled to be revised upward from July 1, 2017, a senior tax official told.
The revised tables are used for the calculation of federal taxes — capital gains tax (CGT), withholding tax and section 111 of the Income Tax Ordinance 2001.
“We completed our homework on the revised tables in June 2017 as part of the budget exercise,” the official said, adding that the finance ministry had informally directed the FBR to put the matter on the back-burner for the time being.
However, the official said that the FBR could revise the tables at any time in the fiscal year, since there was no bar or specific time frame mentioned in the agreement under which the tables were revised.
But another source in FBR told that Finance Minister Ishaq Dar had asked tax officials not to revise the table upward, owing to the bureau’s current preoccupation with the Panama Papers investigation.
Tax officials have lately been busy with Joint Investigation Team (JIT) and Supreme Court proceedings and have not had a chance to determine fair market prices for properties, as it was tasked to do.
Last year, new valuation tables were issued for 10 cities in Punjab: Lahore, Rawalpindi, Jhelum, Gujranwala, Gujrat, Sialkot, Faisalabad, Multan, Rahim Yar Khan and Bahawalpur; three in Sindh: Karachi, Hyderabad and Sukkur; two cities each in Khyber Pakhtunkhwa and Balochistan: Peshawar and Abbottabad; and, Quetta and Gwadar.
A revision was also approved for Islamabad, where rates had remained unchanged since 2004.
“We have received around Rs15 billion from real estate in FY2016-17,” the tax official said. Earlier, FBR was receiving a few billion from the realty sector owing to lower than market value rates of taxation.
The existing deputy commissioner-approved rates for property in most of the cities are still far from the market value, despite the revision last year.
Federation Of Pakistan Chambers Of Commerce & Industry President Zubair Tufail told the government had accepted nearly all the demands of real estate stakeholders and that an understanding was reached that the rate table would be gradually revised upwards, he said.
Mr Zubair was representing the private sector in meetings with realty stakeholders on the issue of revisions.
He admitted that the current valuations for tax purposes were much lower than market rates. “There needs to be some improvement in these tables. The government has not touched the issue in the budget and the matter will now go to the next budget,” he said.
A tax official, however, said that there were several lobbies, especially industrialists, who had invested in the real estate sector because of lower taxation and higher returns. “There is strong resistance from these lobbies to any upward revisions,” the official said.