The provinces have not yet reviewed the valuation rates of immovable property on the basis of fair market value, which might create problems for the Federal Board of Revenue (FBR) to meet the annual target of Rs 3 billion under this head during 2008-09.
It is learnt that the FBR had fixed the target of Rs 3 billion for the current fiscal year through revision of valuation rates of immovable property by the provincial governments.
According to FBR estimates, there is need of doubling the existing valuation rates of the immovable property by the provinces to generate an additional revenue of Rs 3 billion during current fiscal. As capital value tax collection has to be done on the basis of reviewed valuation of immovable property from July 1, 2008, the FBR seems to be unable to get revised values from provincial governments.
So far, the provinces have not responded to FBR communication since announcement of budget 2008-09. Details show that capital value tax (CVT) is payable on the acquisition of immovable property and is levied on its value as recorded in mutation deed, registered deed, or power of attorney.
The recorded value is mainly based on the valuation rates fixed by provincial governments for the purpose of collection of stamp duty. These rates are reviewed periodically, yet the same do not commensurate with the fair market value of immovable property which is not only affecting collection of stamp duty but capital value tax as well.
Therefore, the federal government has asked the provinces to review and rationalise the existing rates and bring it close to the fair market value. In the first step such rates may be doubled. The provincial governments have been simultaneously asked to undertake similar exercise and revise the valuation rates in the same manner, the FBR said.
Meanwhile, the FBR has requested the Chief Secretaries of all the four provinces to respond at the earliest on the Federal Cabinet's decision to review the existing valuation rates of the immoveable properties in their provinces for the purpose of transfer of such properties.
Following the observation of the Federal Cabinet, in its meeting held on June 11, 2008, that valuation rates of immoveable properties are not commensurate with the fair market value of such immoveable properties, Federal Finance Minister, in his letter dated June 16, 2008, had requested the Chief Ministers of all the four provinces to review and rationalise the existing values fixed for the purpose of their transfer.
Federal government has not received any response from any of the province so far which indicates that the matter is still under consideration of the provincial governments and the revision of the rates is yet to be made, the FBR said.
It may be noted that the revision of the existing fixed rates was expected to be completed during the month of June and was to be made effective from July 1, 2008.
Member (Direct Taxes), FBR, in his separate letters dated August 13, 2008, has requested all the Chief Secretaries to look into the matter personally and do the needful at the earliest, FBR added.
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