Construction industry: FBR considering re-imposing WHT at minimum rate of five percent

The Federal Board of Revenue is planning to re-impose withholding tax (WHT) at minimum rate of 5 percent on construction industry in budget 2012-13. According to sources, the revenue body with an aim to plugging the revenue leakages in construction industry is striving to get approval from Ministry of Finance to reintroduce WHT at minimum rate of 5 per cent on construction industry in forthcoming budget.
They said the tax officials were of the view that the absence of WHT provision at the time of approval of site plan provides an opportunity to the medium and small builders to escape the tax assessment. Therefore, the re-imposition of WHT provision for approval of site plan will play a vital role to generate substantial revenue from medium and small builders.
The sources said, "The minimum tax might be collected at the rate of 5 per cent from the owner of such property at an estimated cost of construction at the time of approval of site plan for construction in respect of any building/residential house."
When contacted, chairman, Association of Builders and Developers of Pakistan (ABAD) Mohsin Shekhani feared further downward spiral in construction activities across the country, saying that if the said provision was reintroduced, the revival of construction activities would become more problematic. He said although the construction industry is already confronting with Sindh Revenue Board (SRB) over the imposition of sales tax on services, the proposed move from federal revenue authority would create more adverse impact on the construction activities.
He said the authorities should facilitate builders and developers to overcome the shortage of 8 million houses in the country. Moreover, Shekhani said this proposal would only raise disenchantment among builders and developers as the industry is already paying Capital Value Tax (CVT), stamp duty, registration fee and Capital Gain Tax (CGT), despite low construction activities.