Proposal to lower property valuation rates blocked

Revised rates would have meant lower tax collection on transactions .

Shahbaz Rana February 22, 2017
The report had proposed to lower property valuation rates for areas in Karachi and Faisalabad. PHOTO: AFP

ISLAMABAD: Opposition members of the National Assembly blocked a treasury move Tuesday to lower recently-notified property valuation rates for tax collection purposes for only two cities, terming the proposal unconstitutional.

The National Assembly Standing Committee on Finance and Revenue could not adopt a report of its subcommittee that had recommended significantly reducing the property valuation rates for select areas of Karachi and Faisalabad.

Syed Naveed Qamar of Pakistan Peoples Party and Asad Umar of Pakistan Tehreek-e-Insaf blocked the move.

The report was prepared by PML-N member Mian Abdul Manan, elected from Faisalabad and Muhammad Ali Rashid, MQM’s Member NA from Karachi.

They had proposed to lower property valuation rates for Defence Housing Authority (DHA) Karachi, SITE Industrial Area Karachi, Port Qasim Authority Karachi, Sindh Graduate Multipurpose Memon Goth Industrial Estate and Faisalabad Real Estate.

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In August last year, the Federal Board of Revenue (FBR) notified fresh property valuation rates for 21 major cities of the country for the collection of withholding and capital gains tax on property transactions. Finance Minister Ishaq Dar had claimed that fresh valuations would fetch an extra Rs100 billion.

These rates were higher than the prevailing Deputy Collector Rates but were still only 30% to 40% of the actual market rates.

The subcommittee proposed that the rates for some areas of Karachi and Faisalabad should be significantly cut down and specified the new rates for the FBR to implement for these cities.

However Qamar said, “It is not the job of the finance committee to determine area-specific property valuation rates.” He agreed to the principle that the rates may gradually be increased but this should not be done by the standing committee.

PTI’s Asad Umar went a step further and said that specifying new property valuation rates by a parliamentary body was unconstitutional, as its role was restricted to only supervision. He said that it was the prerogative of the executive to determine these rates.

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“Accepting the subcommittee’s report would mean endorsing an attempt to whiten black money,” said Umar.

FBR Chairman Dr Mohammad Irshad said that accepting the sub-committee’s recommendation for only two cities would open a new Pandora’s box. Dr Irshad said that it was wrong to assume the FBR notified the new property valuation rates on its own in August last year. The rates for 21 cities had been determined in consultation with relevant stakeholders, said the FBR chairman.

He, however, admitted that there were anomalies in the notified rates but insisted that this should be done through a proper mechanism.

However, Shahban Elahi, representative of Pakistan Real Estate Forum, said that the property transactions were taking place on the general point of attorney due to high valuation rates in Karachi. He said that this temporary arrangement may create legal issues in the future and the committee should be sympathetic towards the real estate sector.

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Tax amnesty

PTI’s Asad Umar also opposed the move to give a tax amnesty scheme at rates which are lower than the prevailing standard income tax rates.

“It seems that Pakistan’s government and parliament is hand in gloves with tax thieves,” said Umar.

The FBR was against any kind of tax amnesty scheme, said Rehmattullah Wazir, FBR’s Member Inland Revenue Policy.

However, a written brief the FBR submitted in the standing committee did not oppose the amnesty scheme but narrated an overall situation where various stakeholders were seeking tax amnesty scheme.

“The federal government in principle has not taken any decision as yet on launching of amnesty scheme for overseas Pakistanis on repatriation of their funds and assets held abroad,” stated the FBR.

Nonetheless, it said that the Senate Standing Committee on Finance in December last year proposed that a general tax amnesty scheme might be introduced on similar lines.

In December also, the FBR gave the finance minister the first briefing on the broader contours of the general amnesty scheme. The bureau shared the model of the Indonesian tax amnesty scheme with Dar - Indonesia is charging different rates for local and offshore assets aimed at attracting wealth stashed abroad.

According to the preliminary proposal, the government may offer to disclose hidden wealth stashed in Pakistan by paying a 5% rate during first month, 7.5% in the second month and 10% for third and fourth month.

In order to attract foreign assets, the government may set 2.5% rate for the first month, 4% for second and 5% for the last two months, they added. However, these rates are not yet final.

Published in The Express Tribune, February 22nd, 2017.

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