The Government of Pakistan through Federal Board Of Revenue (Revenue Division) is pleased to constitute a “Tax Reforms Commission” which has set up for review and rationalization of direct and indirect taxes, Customs Tariff rationalization, review of Autonomy and Administrative Structure of FBR, Creation of border force to deal with illegal movement of persons and goods across international of persons and goods across international borders and other related issue, its objectives are possible to obtain if the tax collection procedure be made simpler and easy so that the goals of the tax reforms could be achieved.
Haji Zahid Bin Sadiq, General secretary of DHA Estate Agents Association, Lahore Cantt has recently sent a detailed letter to “Tax Reforms Commission” with various recommendations regarding the amendments to be needed to process of Taxation. He said in his letter that the reduction in property transfer taxes, transaction volume would be increased and the government will generate more revenue. Reviewing the current administrative structure, tax laws, making tax tariff more realistic, and by improving the performance of the FBR, the real estate industry would be more strengthen.
Real estate business occupies an important position in economic progress, social prosperity and welfare of the beloved country. Millions of people with professional services and investors of billions of rupees are attached to the real estate business. However the process of tax collection on the property’s transaction is too orthodox and moreover, complications have also been increased by the former Governments.
Bin Sadiq said that he would like to draw your attention towards the complicated tax collection method which is levied on real estate business. It is not only the cause of economic depravity of millions of people but also causing the transfer of investments to foreign countries.
He declares that during the property transaction, the buyers and sellers ha0ve to bear the following expenses with the total cost of a plot/property.
- Capital Gain Tax (Withholding Tax) for the person which is non-filer has been increased from 0.5% to 1% from FBR on sale of the property. On purchase of property, the buyer has to pay 1% advance tax if the payee is filer and 2% if the buyer is a non-tax payee.
- This year Stamp duty has been increased from 2 % to 3% by the provincial government.
- The provincial government charged 2 % Capital Value Tax (CVT) during property transactions.
- 3 % transfer tax is charged on properties located in the jurisdiction of the Cantonment Board.
- The property buyers and sellers are required to pay transfer charges as imposed by the Concerned housing authorities and cooperative housing schemes.
However, seller and purchaser have paid heavy taxes, instead, to appreciate them, FBR or other department start to questions through different types of notices, which absolutely discourage the investors, local and overseas clients.
In the result, when the expanse in transfer transaction increase and transaction volume has been reduced adversely due to heavy taxes. DC rates have been increased from 30% to 85% while preparing a valuation table by the provincial government. Due to this increase, real estate business has been affected adversely and a state of severe discomfort has been created in the property dealers. It is requested that the government may kindly reduce the heavy taxes on property transaction /transfer, especially in DC rates so that the investment could be brought back and the government could earn more revenue. Thus the real estate business will be able to flourish.
Bin Sadiq reminds that the period of government of PML (N) in 1997 was really memorable due to the good governess, progress, prosperity, the excellent performance of all the institutions, provision of basics need of the nation and peaceful environment. It may be called the golden period because at that time the Punjab government has reduced the property transfer tax from 17% to 7 % to save the real estate business. Due to this decision, property business was increased and the government earned billions of rupees as tax revenue.
He also stated that it is pointed out with great concern that before imposing of heavy taxes, real estate business was at the peak but now this business is declining. Due to heavy taxes, the interest of buyers and investors in this business has vanished and billions of rupees have been transferred to other countries.
He also requested that keeping in view the economic problems at a national level and difficulties of business sectors and the facts stated above, it is requested that orders to take historical initiatives in this regard may kindly be issued so that the real estate industry may flourish and a million peoples could save from unemployment.