Property investment may invite 2% WHT
Govt considering levy in a bid to plug leakages, widen tax base.
For those who file income tax returns, the tax rate is proposed to be 1% on purchase of property, say sources in the Ministry of Finance. CREATIVE COMMONS
ISLAMABAD:
The government may slap 2% withholding tax on those property buyers that do not file income tax returns in an attempt to net the income that is invested in real estate and broaden the tax base.
For those who file income tax returns, the tax rate is proposed to be 1% on purchase of property, say sources in the Ministry of Finance.
The government is already charging tax on the sale of properties. The proposal has been floated in a bid to capture gains in the real estate market and plug revenue leakages.
Authorities expect minimum revenue of Rs10-15 billion in fiscal year 2014-15 from the real estate market. According to studies, the federal government is sustaining losses of about Rs15 billion due to its inability to capture gains in the real estate sector.
Stock market and real estate are the two sectors that are not taxed according to their potential, say tax experts.
The government is also considering introducing a clause in the Finance Bill 2014 that will authorise it to buy property by paying more than the prices declared in property transfer deeds. The price could be higher in the range of 15% to 20% compared to the one declared in deed documents.
India is already implementing a similar scheme under which Indian states have the right to buy property by paying higher rates.
The backers of these proposals believe the steps will also help arrest skyrocketing prices of real estate that go unchecked in the absence of proper regulations. Sources insist that a tax on purchase of properties will discourage short-selling, which is driving up prices.
At present, people involved in real estate business drastically understate the value of their properties to evade taxes, charged by federal and provincial authorities.
The real estate market is becoming a haven for people to achieve virtually tax-free gains besides parking their ill-gotten money.
The PML-N government’s move to broaden the tax base has backfired in its first year. Against the target of bringing 100,000 people in the tax net, the Federal Board of Revenue (FBR) could add less than 7,000 new taxpayers through its tax base widening drive, according to data provided by the FBR to the Senate Standing Committee on Finance and Revenue.
As part of its strategy to encourage people to enter the tax net, the government may link new electricity, telephone and gas connections with the production of National Tax Number (NTN), sources said.
It has not yet decided the fate of Income Support Levy introduced last year at the rate of 0.5% of moveable assets. It faced resistance from within the power corridors and the business community.
There was a proposal that the levy may be withdrawn or converted into a minimum alternative tax, sources said.
Published in The Express Tribune, May 24th, 2014.
The government may slap 2% withholding tax on those property buyers that do not file income tax returns in an attempt to net the income that is invested in real estate and broaden the tax base.
For those who file income tax returns, the tax rate is proposed to be 1% on purchase of property, say sources in the Ministry of Finance.
The government is already charging tax on the sale of properties. The proposal has been floated in a bid to capture gains in the real estate market and plug revenue leakages.
Authorities expect minimum revenue of Rs10-15 billion in fiscal year 2014-15 from the real estate market. According to studies, the federal government is sustaining losses of about Rs15 billion due to its inability to capture gains in the real estate sector.
Stock market and real estate are the two sectors that are not taxed according to their potential, say tax experts.
The government is also considering introducing a clause in the Finance Bill 2014 that will authorise it to buy property by paying more than the prices declared in property transfer deeds. The price could be higher in the range of 15% to 20% compared to the one declared in deed documents.
India is already implementing a similar scheme under which Indian states have the right to buy property by paying higher rates.
The backers of these proposals believe the steps will also help arrest skyrocketing prices of real estate that go unchecked in the absence of proper regulations. Sources insist that a tax on purchase of properties will discourage short-selling, which is driving up prices.
At present, people involved in real estate business drastically understate the value of their properties to evade taxes, charged by federal and provincial authorities.
The real estate market is becoming a haven for people to achieve virtually tax-free gains besides parking their ill-gotten money.
The PML-N government’s move to broaden the tax base has backfired in its first year. Against the target of bringing 100,000 people in the tax net, the Federal Board of Revenue (FBR) could add less than 7,000 new taxpayers through its tax base widening drive, according to data provided by the FBR to the Senate Standing Committee on Finance and Revenue.
As part of its strategy to encourage people to enter the tax net, the government may link new electricity, telephone and gas connections with the production of National Tax Number (NTN), sources said.
It has not yet decided the fate of Income Support Levy introduced last year at the rate of 0.5% of moveable assets. It faced resistance from within the power corridors and the business community.
There was a proposal that the levy may be withdrawn or converted into a minimum alternative tax, sources said.
Published in The Express Tribune, May 24th, 2014.