ISLAMABAD: The government has shown reluctance to apply a key reform brought in by the previous PML-N administration over immovable properties during its last days in office.
Federal Board of Revenue (FBR) Member Tax Policy Dr Mohammad Iqbal declined to provide a clear commitment for the setting up of Directorate General of Immovable Property, reports Express Tribune.
Notwithstanding, it is mandatory under Income tax law to establish the Directorate General of Immovable Property.
Mr Iqbal in response to a query stated the provinces need to be taken into confidence and till they don’t change their tax laws and property tax rates; the new system will face hindrances in being implemented.
Ex-prime Minister Shahid Khaqan Abbasi during his tenure had brought the concept of the pre-emption right via the Finance Act 2018 which came into force from July 1st.
Mr Abbasi had decreased tax rates on sale and purchase of properties from a range of 1%-4% to one percent of the gross value of the property.
However, the tax regulator was unable to apprise regarding the setting up of Directorate General of Immovable Properties which would have provided authorities with the power to purchase assets that were undervalued to dodge taxes.
Also, the FBR has failed to raise the property valuation rates in major cities as an alternate measure to the DG Immovable Properties.
According to the pre-emption scheme, the government is authorized to acquire any asset whether residential or commercial at a 100% higher price point than what has been declared by the owner at time of registration.
Ironically, for one property there are three rates, one is the deputy collector (DC) rates of the provinces, second, the actual price and last is FBR’s valuation rates which are more than DC rates but lesser than the market rates.
Buyers take advantage of undeclared assets to pay the difference between market value and FBR valuation rates.
The new scheme brought in by the previous government brings an end to this practice since it permits property owners to declare it at the actual price and pay 1% tax.
However, the wait in the issuance of notification is causing payment of federal taxes at prevailing rates of 1% and 2% is levied on sellers and 2% and 4% being paid by the purchasers.