The FBR hasn’t yet established the Directorate General of Immovable Property, even though it is an obligation under income tax law. The FBR’s Member Tax Policy Dr Mohammad Iqbal did not give a clear commitment to establish the Directorate General of Immovable Property while talking to the media. “Unless provinces are taken on board and they change their tax laws and property tax rates, the new system will be difficult to implement,” said Dr Iqbal while responding to a question.
The former Prime Minister Shahid Khaqan Abbasi and finance minister Miftaa Ismael had taken a courageous step and introduced the concept of pre-emption right through the Finance Act 2018 that came into effect from July 1, 2018.
Former PM Abbasi had also lowered the tax rates on purchase and sale of properties as an incentive, ranging from 1% to 4%, to only 1% of the gross value of the property. Both these measures were planned to come into force at once.
But the FBR has not yet notified establishment of the Directorate General of Immovable Properties that could have given authorities the first right to acquire assets that were undervalued to evade taxes. It has also not increased the property valuation rates in big cities as an alternate to the DG Immovable Properties.
The preemption scheme entitles the government to purchase any asset – residential or commercial – at 100% higher price than the one declared by the owner at the time of registration. The move is meant to control under-declaration of asset values at the time of registration.
At present, there are three rates of one property. One is the actual price, the second is deputy collector (DC) rates of the provinces, and the third is the FBR valuation rates that are higher than the DC rates but lower than market rates.
But the delay in issuance of notifications is resulting in payment of federal taxes at the existing rates of 1% and 2% being charged from the sellers and 2% and 4% being paid by the purchaser.
From July through September, the FBR collected Rs1.1 billion withholding tax from the sellers –up by 10.4%. The collection from the property purchasers stood at Rs508 million –down by 45% during the first quarter.
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17 November, 2019