ISLAMABAD: Prime Minister Shahid Khaqan Abbasi’s pet scheme to acquire the ‘first right to buy’ a property in a bid to discourage tax evasion is unlikely to find takers, as both Senators and the Federal Board of Revenue (FBR) have doubted its success.
The Senate Standing Committee on Finance and Revenue on Friday declared the scheme unconstitutional, falling short of killing it. It gave the federal government a chance to withdraw the package from the Finance Bill 2018 or else it would recommend against the scheme. However, its recommendations are not binding, reports The Express Tribune.
It seems that the FBR highly doubts its success. Instead of implementing it from July 1, the FBR has proposed in the Finance Bill that the government should decide the date of implementation.
The Benami Transaction Prohibition Act, another law that has been approved by parliament to discourage concealment of assets, remains inactive due to delay in approval of its rules.
“According to the Constitution, taxes on immovable property are not a federal subject,” said Senate Standing Committee on Finance Chairman Farooq Naek. “The government should restrict itself to the subject of recovering unpaid taxes arising from the undeclared value of the property. The concept of understatement of the asset value can only be known when the FBR knows beforehand what the fair market value is.
“The proposal that the fair market value would be assessed after the transaction is similar to putting the cart before the horse.”
In the first week of April, Prime Minister Abbasi announced a five-point economic-reforms package, which included property rights. It entitles the government to purchase any asset – residential or commercial – at 100% higher price than the one declared by the owner at the time of registration. The move is meant to control under-declaration of asset values at the time of registration.
In the Finance Bill 2018, the FBR has proposed to set up the Directorate General of Immovable Property, which the committee members termed unconstitutional. “The scheme is a non-starter, as acquiring property is not a federal subject”, said former finance secretary, Dr Waqar Masood, who is assisting the committee as an expert.
“We also acknowledge that until the provinces abolish the deputy collector rates and stamp duties rates, the scheme cannot be successful,” said Member Inland Revenue Policy of the FBR Dr Mohammad Iqbal before the standing committee.
Masood added that the provinces would not lower their taxes, which amount to 8% of the value of the property transaction. Iqbal said that the scheme will not be applicable from the start of the fiscal year, which was contrary to the announcement made by Prime Minister Abbasi.
The standing committee advised the government to withdraw the pre-emption scheme, as it did not want to reject the package and cause any embarrassment to the premier.
According to the FBR’s proposal, the proceedings for acquisition of property should be initiated when the Directorate General, on the basis of valuation, has reason that some property has been transferred at less than market value.
PTI Senator Mohsin Aziz said that the FBR should be held accountable for buying properties at exorbitant rates. He said that there were possibilities that the FBR could acquire properties at rates, which could be far higher than the prevailing market rates.