ISLAMABAD: The real estate sector tax amnesty scheme has seen people whiten Rs290b of their ill-gotten wealth in a span of three months.
In return the government has received a meagre Rs877m in taxes, reported Express Tribune. Half of these transactions have been conducted in Karachi, 1/4th in Lahore, 1/3rd in Islamabad and Hyderabad.
According to official data, Federal Board of Revenue (FBR) collected Rs877.3m in taxes under Section 236-W of Income Tax Ordinance from July to September.
This section had been added into the ITO to provide legal coverage for the real estate tax amnesty scheme. As per the law, buyers and sellers of real estate are permitted to get their assets validated by payment of 3pc penalty as advance income tax.
Once payment of advance income tax is realized, people can declare this hidden wealth as white and include it in their book of accounts.
Independent tax experts after assessing payments of Rs877m have reached to the conclusion that sellers have whitened Rs292b worth of black money. These transactions have been said to be conducted by sellers only, and if buyers’ transactions get added the amount would rise by 100pc.
FBR incurred Rs87b losses in revenue at a standard 30pc income tax rate because buyers and sellers opted to whiten their money via amnesty scheme, which excluded the penalty that is 100pc of the payable tax.
Under Section 236-W of ITO, people in Karachi whitened Rs150b of their money and paid taxes of Rs452m from July to September. In Lahore, approximately Rs75b were whitened and paltry taxes of Rs227m were contributed to the national exchequer.
Hyderabad had Rs26b whitened under the real estate tax amnesty scheme and taxes of Rs79m were paid in return. In Islamabad, people proclaimed Rs31b worth of real estate and paid taxes of Rs94.4m in lieu of it.
Due to openings and loopholes in tax and various property tax rates, realtors can declare two types of property prices, one for provincial tax payment and other for federal taxes. And both rates differ significantly and are lesser than the current market rates.
Due to disparity between deputy collector rates and actual market rates, people are said to have parked over Rs7t in the real estate sector over the last few years.
The government last year in June had tried to rein in the real estate sector by bridging this gap, but undue political pressure caused it to offer a tax amnesty scheme.
Due to this, the government delayed plans to institute a 30pc increase in property valuation rates for federal tax collection purposes which was supposed to come into place by July 1st 2017 as directed by Finance Minister Ishaq Dar.