Tax amendment ordinance: PPP ditches opposition, allows govt to steer bill

PPP senators also propose giving FBR chairman an extension in service

ISLAMABAD: In spite of being in minority in the Upper House, the government managed to steer the Income Tax Amendment Ordinance 2016 through a Senate panel after the Pakistan Peoples Party (PPP) ditched other opposition parties and sided with the government.

Headed by the Senator Saleem Mandviwalla of the PPP, the Senate Standing Committee on Finance and Revenue approved the bill despite expressing reservations over granting the Federal Board of Revenue (FBR) powers of determining property valuations.



The government has implemented a new law that from July 1 authorised the State Bank of Pakistan-nominated valuers to determine the fair market value of the properties for working out tax liabilities. After opposition by the stakeholders, the government again authorised the FBR from August to notify the rates by promulgating an ordinance.

The PPP senators not only backed the government bill but also proposed to give an extension in service to FBR Chairman Nisar Mohammad Khan, who is retiring in January next year.

The opposition parties enjoy majority in the 12-member Senate committee and the ruling Pakistan Muslim League-Nawaz (PML-N) has only three members. As many as eight members attended the meeting, two each from the PPP and the PML-N.

The bill, once approved by the National Assembly, would give permanent legal cover to a tax amnesty scheme to those who have invested in the real estate sector besides approving a new property valuation mechanism for collecting taxes.



The government moved the bill, ‘The Income Tax Amendment Ordinance 2016’ to provide permanent legal cover, as the life of legislation done through an ordinance is only 120 days.

The senators belonging to PML-Q, Awami National Party (ANP) and Pakistan Tehreek-e-Insaf (PTI) boycotted the committee proceedings after registering their protests over what they called “the unconstitutional act” of the government.

They had objections over the government’s action to give the authority of determining the values of the properties for taxation purposes to the FBR.



“Under the Constitution, determining value of immovable property is a provincial subject and the proposed bill is supra-constitutional,” said Senator Kamil Ali Agha of the PML-Q. However, Sheikh Sarfraz, the chief drafter of the law ministry, opined that the proposed bill was not in violation of the Constitution.

The PTI’s Senator Mohsin Aziz and the ANP’s Senator Ilyas Bilour endorsed Senator Agha’s stance. They rejected the bill before boycotting the committee proceedings. “The law will be a source of hatred between the Centre and the federating units,” said Senator Agha.

The property transactions done by the big housing societies are purely their internal matters and the FBR is unable to catch them, said Senator Aziz. He said these societies have been spared at the expense of small and medium-sized housing societies.

However, the FBR chairman said the big societies have been brought under the ambit of law for the first time and he faced no pressure to reduce or increase property valuations of any specific city or area.

The opposition senators were of the view that the purpose of change in property valuation mechanisms was only for getting extra revenue, unlike the government’s claim that the mechanism has been changed to document the black economy.

The FBR’s Member Inland Revenue Policy Rehmatullah Wazir said the new property valuation mechanism would help capture Rs7 trillion that is invested in the realty sector.

The bill would also provide permanent legal cover to a tax amnesty scheme, as the ordinance has offered that those properties that are bought before July 1, 2016, can be declared by paying 5 per cent Capital Gains Tax.

However, Dar insisted in past that it was not an amnesty scheme. To a question whether the government would inquire source of income invested in past, the finance minister had said, “We should look forward”.

Published in The Express Tribune, September 17^th, 2016.