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The Central Board of Revenue (CBR) cannot bring real estate within the tax net being provincial matter. On the other hand, provinces are co-ordinating with the tax authorities to document services of professionals for the purpose of levying sales tax. However, CBR has sought information from the provinces about purchases of property and income in the real estate business to assess their actual income. CBR Chairman Abdullah Yusuf informed the Public Accounts Committee (PAC) on Wednesday that there was a huge gap in two important sectors ie stock exchanges and real estate.
Stock exchanges are paying very nominal amount as tax and, secondly, tax from the real estate business is negligible. The CBR cannot impose tax on real estate business as it is a provincial matter and cannot be collected effectively without the help of provinces.
On the issue of services, provinces are empowered to collect GST on service providers. However, at present only a limited number of services are liable to sales tax, which resulted in narrow tax-base. There is a need that provinces should expand the tax base by bringing more service providers into the net, CBR Chairman added.
In this regard, the CBR has started consultation with the provinces.
He said that the potential sectors like lawyers and doctors should be brought in the tax net, but there is the culture of not paying taxes, which will definitely change with the passage of time. Moreover, taxing real estate has remained a big problem for the last many years and different types of schemes were launched in the past to bring it into the tax net, but these schemes failed.
PAC asked the CBR to bring real estate, doctors, lawyers and other professionals within the tax net and provide maximum relief to the common man through taxation measures.
PAC members pointed out that real estate and professionals including doctors and engineers are not paying a single penny. On the other hand, these sectors are earning huge profits on daily basis, but their contribution in taxes is negligible. They said that housing societies and businessmen involved in real estate business are spending huge amounts on advertisements on television. What are the sources of money on the advertisement and why they have not been checked for the last many years.
Abdullah said that the experience of CBR for collecting taxes by use of force has not worked during the last many years. There is a need of comprehensive databank to have firsthand information about the taxpayers. For example, CBR is obtaining information about foreign travels from the FIA/Immigration staff. Similarly, the information about the utility bills is verified by the utility agencies. The reliability of information plays a key role in demanding taxes from the taxpayers. This could only be done electronically without direct interaction with the taxpayers.
Presently, the CBR can ask the banks to submit information about the income on the deposits of taxpayers.

Copyright Business Recorder, 2005

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