ISLAMABAD: Real estate sectors contribution to the national exchequer stood at a meagre 0.1 percent of the size of the economy or Rs23 billion in FY18.
The realty sector which attracts most of the ill-gotten wealth paid a touch over Rs23 billion in FY18 and this included tax collection under the amnesty scheme introduced by the previous PML-N government, reports Express Tribune.
During FY18, the Federal Board of Revenue (FBR) amassed Rs5.2 billion in taxes on sale and transfer of properties, which was 14 percent higher than FY17.
And the tax regulator collected Rs13.2 billion in shape of withholding taxes on the acquisition of properties.
Also, the process of legalizing ill-gotten wealth invested in the realty sector continued during FY18. The tax regulator collected Rs4.4 billion in taxes by levying a 3 percent differential between FBR’s computed property rates and deputy collectors’ rates.
However, gathering taxes at the fair market value on the properties proved formidable for the tax authorities.
The previous PML-N government had incorporated fair market prices for federal tax collection, however, it was coerced by the traders to drop this policy.
Ex-prime minister Shahid Khaqan had initiated a bold step and brought in a ruling which allowed the government to acquire a property which was being declared at a lower price point than its market value.
However, the tax regulator hasn’t still issued a notification in this regard and failed to appoint director general for immovable properties.
Officially, the real estate values are recorded at around 30 percent of market prices, essentially because of very low deputy collector’s rates for collection of stamp duty.
Currently, for property valuation, there are three types of rates for taxation purposes. The first is the actual market value that nobody declares, second is the rate computed by the FBR and the last is provincial deputy collectors’ rates.
The primary reason for abysmal tax collection from the real estate sector is all big housing societies carry out business without recording the transaction, as per market experts.
Also, the tax regulator has failed in collecting due taxes from developers and builders. FBR was only able to collect a meagre Rs232.7 million from developers and builders in FY18, although it was an improvement from FY17 when it collected Rs190.3 million.