Real estate sector: developers, builders enjoy unique opportunity for whitening undeclared assets

The developers and builders in real estate sector have a unique opportunity to whiten their undeclared assets under the amnesty scheme to be expired on June 30, 2018, as the Federal Board of Revenue (FBR) is fully prepared to take enforcement actions against the evaders from July 1, 2018 onwards.
Sources told Business Recorder here on Tuesday that the success of the domestic amnesty scheme mainly depends upon the writ of the tax authorities, efficient and effective third-party information system, perception of taxpayers about the tax department and fear among the taxpayers that department can access their concealed assets and income. The lower rates of taxes for legalization of assets are available to the developers and builders of the country to avail the scheme and come into the tax net till June 30, 2018.
So far, the broadening of tax base (BTB) zones of the FBR have collected authentic third-party data of the builders and developers and their investors in different commercial and residential projects.
If the members and investors/allottees of builders and developers' association, defense housing societies and big housing projects including commercial and residential schemes would not declare their assets/income, the FBR will start exposing them from July 1, 2018 on the basis of valid, solid and documented information available with the Directorate General of Broadening the Tax Base (BTB).
Data revealed that over 50 percent of the investors in major real estate projects in major cities of Karachi, Lahore, Islamabad and Rawalpindi are unregistered with the tax department. The FBR has analyzed data obtained from different housing societies and projects as well as DHA, Sindh Building Control Authority (SBCA) and Punjab Information Technology Board (PITB). The SBCA is a regulatory and supervisory body whose prime function is to ensure that the approval of building plans and NOCs, etc, are in conformation with the existing Building & Town Planning Regulations.
One of the biggest associations of developers and builders has 940 members who are potential taxpayers. The BTB zones are equipped with all kinds of data of these builders and developers. The information of thousands of residential and commercial projects of this association of developers and builders has been collected and is ready to be utilized for enforcement purposes. The FBR's department has captured and verified all data available with the SBCA and PITB. Based on the data verification, the FBR is ready to take action against the developers/builders and their investors who are either not registered or have concealed their income/assets.
During a meeting between the director general of BTB and a major association of developers and builders, the notices issued to the developers/ builders were discussed. The director general of BTB had assured them that time has been given to the developers and builders and investors till June 30, 2018. From July 1, 2018, the FBR would be in a position to enforce compliance and take action against the persons involved in concealment of assets without discrimination. The developers and builders have been provided with an opportunity to declare their assets under the amnesty scheme. In case of non-compliance, the tax department is fully ready to take action against them based on available data.
Real estate information has been divided into three categories. First category covers investments not declared. The second category covers under-declared and mis-declared investments in the real estate sector. The third category covers cases where wealth statements have not been filed and their investments do not match with the declared income of investors. However, the FBR is not concerned about the fourth category about investors who accurately declared their investments.
Taxpayers have two options. The first option is that the builders and their allottees should honestly file declarations under the amnesty scheme and legalize their assets/income. Otherwise, full-fledged action from July 1, 2018 would be taken against them based on third-party data available with the FBR.
Referring to the data analysis of developers and builders, one example has been shared by the sources. They said that a field formation of Karachi has 88 cases of developers and builders. Out of 88 cases, 27 have concealed or undeclared their assets. In case of 36 cases, wealth statement has not been filed.
Another mega housing and residential project of Karachi has also revealed concealment of assets. The data analysis revealed that one of the investors from Rawalpindi has not shown investment of Rs 1 billion in this mega project of Karachi. A Lahore-based taxpayer has not declared Rs 560 million investment in the said project of Karachi. Data further revealed that the BTB Zones have collected so much information that data matching of each and every investor would be done based on the latest information.
Thus, the FBR is fully equipped with the data and ready for action from July 1, 2018 against the builders, developers and their investors, who have concealed assets and income, they added.