Commendable for it, the Federal Board of Revenue (FBR) has moved to computerise the registration of property ownership to extend the reach of its tax net. According to a Recorder Report, the FBR plans to institute a computerisation system at 129 offices of the provincial/district registrars of property for recording transactions and accurate calculation of capital value tax (CVT) on property.
The plan also includes the installation of a CVT system at banks, which would be required to issue computerised payment receipts and the documentation of property deals. Based on the data so collected, the system would automatically calculate the CVT, taking into account the size of the plots under transaction. Our report also notes that hundreds of housing societies operating across the country would be linked with the CVT computer system for monitoring and registration purposes.
This indeed would be an important step towards checking revenue leakages. An idea of the extent of the problem can be had from the findings of a pilot project in Karachi. It shows that over 6000 property owners never filed their income tax returns. In fact, they had not bothered even to obtain a National Tax Number (NTN). Similarly, from among the 4000 people who had purchased properties in other parts of the country since July last, half of them ie, 2000, failed to file their tax returns.
This has been going on largely due to a big legal loophole in the property deals carried out under the 'benami' law. It allows owners to use the general power of attorney to sell property without paying any tax. The buyer acquires general power of attorney, along with an 'agreement to sell'. It being an irrevocable arrangement, house or land can change hands, without the government receiving any revenue.
Apparently, most of the tax non-payment cases the FBR project uncovered were registered under the general power of attorney. Clearly, a change in this law is in order. Another good step that the FBR is in the process of taking, is to improve its database with the help of Pakistan Revenue Automation Limited (Pral).
Information is to be collected from big hospitals, medical centres, clubs, airports and other sources to bring potential taxpayers into the tax net. Needless to say, computerisation of records in these, as well as other areas of economic activity, can go a long way in catching tax evaders and increasing revenue generation. It will also help the FBR to better field the criticism that it lacks both the imagination and the will to expand its tax base, and that it keeps milking the captive tax payees, comprising mainly the salaried class.
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