ISLAMABAD: The Islamabad-based property developers have expressed grave concern over Federal Board of Revenue’s upward revision of property valuation rates across 56 cities, effective from November 1, 2024.
According to President of the Islamabad Developer Association and former President of the Islamabad Chamber of Commerce and Industries, Sardar Yasir Ilyas Khan, the said revision is anticipated to have a detrimental impact on Pakistan’s real estate landscape and could potentially lead to further capital flight. It is crucial to note that the real estate industry serves as a driving force for approximately 60 allied sectors, and this decision may have severe consequences for these sectors as well.
He emphasized that while the intention behind this move may be to satisfy the International Monetary Fund (IMF) and reduce the fiscal deficit, which currently stands at a concerning 6% of Pakistan’s GDP amounting to Rs.7 trillion, it is essential to engage with the business community before implementing such significant decisions.
56 cities: Values of immovable properties revised upward by FBR
A potential solution could be to expand and diversify the tax base, rather than imposing additional taxes on those already burdened by various forms of taxation. “It is imperative that all stakeholders are involved when making choices that directly affect the business environment,” he stated. “We caution the government that these policies could have profoundly negative repercussions for businesses, potentially destabilizing an already fragile economic situation.”
It is imperative to maintain business confidence in the face of policy changes. Given the current economic climate, disruptions in the business sector must be avoided, especially considering the cessation of wealth circulation due to the introduction of FED and the increase in capital gains tax to 15% this year.
Pakistan’s tax policy on real estate has had a negative impact, leading to capital flight as countries like the UAE, Singapore, Hong Kong, and Malaysia offer lower tax rates and better returns in real estate investments.
In the Dubai real estate market, Pakistani investors have made a significant contribution, amounting to USD 11 billion, positioning them as the second largest group of investors in the United Arab Emirates, he said.
Furthermore, there is a significant trust deficit between the business community and the Federal Board of Revenue (FBR) due to pending sales tax adjustment refunds amounting to billions of rupees. In addition, imposing double taxes on late filers and non-filers acts as a deterrent and discourages others from joining the tax system.
The business community opines that ongoing dialogue with the FBR is essential to strike a balance between achieving revenue targets and ensuring sustained growth and stability in the real estate sector. Failure to consider their input may result in the diversion of capital away from productive sectors of the economy.
Copyright Business Recorder, 2024
Comments