ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to immediately activate the Directorate General of Immovable Property (DGIP) to remove discrepancies/anomalies in FBR’s valuation tables of immoveable properties issued by the FBR Inland Revenue (Policy) Wing.
In this regard, the FTO has issued two orders against the FBR on Tuesday in the matter of “Own Motion” investigation of valuation SRO’s issued by FBR.
Sources told Business Recorder that the real estate sector remained a focus of the international donor agencies keeping in view high revenue potential and check manipulation/money laundering in real estate transactions. In November 2018, a new tax authority DGIP was created, which became dysfunctional in 2019.
Immovable properties in the UAE, UK: Rental income of resident Pakistanis taxable in country: expert
The work of the DGIP was done by the FBR Policy Wing which committed blunders in SROs of the valuation tables of immoveable properties.
The FBR Policy Wing has not hired any professional valuers but allowed its Secretary Inland Revenue (Policy) to notify defective values as communicated by the field formations.
This resulted in blunders in the SROs issued by the FBR on valuation tables of immoveable properties. For example, FBR fixed same values of commercial and residential properties in different areas like district Sheikhupura under FBR’s SRO for Lahore.
The review of the SROs revealed that the off-road and on-road values of properties are the same in some cases. In some cases, commercial values have been fixed on per marla basis and similar kind of blunderers is committed in different SROs.
“If the work has been done by the assigned DGIP, the directorate has done work in a professional manner,” sources added.
FTO’s orders revealed that the Own Motion investigation under section 9(1) of the FTO Ordinance, 2000 was initiated after an extensive review of DC rates and different valuation SRO’s issued by FBR and market analysis by FTO’s research wing.
The research wing found significant anomalies, inconsistencies, infirmities and discrepancies in valuation tables of immoveable properties in SRO 1180(1)12022 amended vide SRO 1610(1)2022. Consequently, the comments of the Secretary, Revenue Division and Regional Tax Office, Islamabad were called. In response to the notice, comments were received from RTO Islamabad, which were examined.
Through the Finance Act, 2018 a new Directorate General under the name & style of ‘Directorate General of Immovable Property’ was created.
This taxation authority was exclusively meant to evolve a complete framework for valuation of property, appointment of valuers, enforcement and appellate procedures. However, it is strange that since 2019 on one hand the FBR’s reliance on real estate related transfer taxes has substantially increased but unfortunately this much-needed Directorate General-IMP has been shelved. Ineptitude of FBR can be judged from the simple fact that under the law, the valuation of immoveable properties falls in the domain of DG-IMP.
Consequently, the FBR issued new valuation tables of immovable property for deduction of withholding taxes under sections 236K and 236C of the Ordinance.
Accordingly, specific SROs were issued for 42 cities. However, third party examination of the said SROs revealed many anomalies and discrepancies in the notified valuation tables. These anomalies mainly revolved around instances of glaring omissions, valuation infested with loopholes, gross undervaluation, arbitrary tabulation and glaring tabulation mistakes.
The plain reading of various SROs issued by FBR from time to time revealed that they are plagued with various inconsistencies, infirmities, and deficiencies apart from lacking uniformity.
The discrepancies and deficiencies render the said SROs lopsided and deficient, in turn creating hurdles for transparency and smooth implementation of tax laws in the real estate sector of national economy.
FBR’s inattention and ineptitude on this account compromises principles of transparency, due diligence and fairness, the FTO order added.
Now, the FTO has directed the FBR Member (Policy Wing) to develop an SOP containing suitable methods of valuation of immovable property.
The FBR to forthwith functionalize the ‘Directorate General of Immovable Property’ established u/s 230F through Finance Act, 2018 as the same is non-functional since its establishment. This would provide an appropriate framework for proper valuation of immovable property, FTO recommended.
The FBR should direct the Member (Policy Wing) to develop an SOPs containing suitable methods of valuation of immovable property.
The FTO has also recommended the FBR to direct Member (Policy) to constitute standing anomaly committee at appropriate levels to address grievances of the stakeholders on issues of valuation,
The FBR should direct the concerned Member (Policy) to hire competent and experienced valuers for valuation of properties for transparency and accuracy.
The Member (Policy Wing) would formulate schedule for periodic revision of the valuation tables and report compliance within 90 days, the FTO recommended.
Copyright Business Recorder, 2023
Comments
Comments are closed.