'Construction relief package toothless unless extended to real estate as a whole'

The housing sector will not be able to reap the true benefits of a relief package for the construction sector, as the amnesty of non-disclosure of investment has not been extended to the real estate as a whole, said tax experts.

They are of the view that the instant relief package has been an outcome of construction mafias who have been trying to launder their untaxed money and the outbreak of COVID-19 has provided them the ideal opportunity.

The independent sources are of the opinion that the role of ABAD is also significant in the design of these relief incentives which actually are not aimed at to provide relief to the daily wagers but to the vested interest who are always in search of such opportunities in the wake of some ensuing crises.

Muhammad Javed, a tax consultant, said the package has focused only the constructed properties while the investment in plots or trading activities of the sector would still remain dormant as heavy Capital Value Tax and Capital Gains Tax would still create a stumbling block in a full circle turnaround of the construction sector.

He said although the provincial governments were quick to identify and provide remedies by suspending service tax on this sector but the FBR has very tactfully saved itself by retaining heavy taxes in the shape of Sales Tax and Federal Excise Duty (FED) on the inputs used in construction like cement and steel. Unless these duties and taxes are there, the cost of construction would remain on the higher side.

He said another area of heavy taxation belongs to imports of construction material and machinery. This needs to be either slashed or reduced significantly.

Shahid Pervaiz Jami, a leading tax lawyer, said the federal government should think of a total overhaul of the taxation policies instead of granting relief to isolated sectors to turnaround the economy as a whole.

He said all types of investments should be exempted from the condition of disclosure of financial source to kick start the economy. We are passing through the phase of force majeure, which demands extraordinary steps otherwise the poorest of the poor would start attacking the richest ones in the absence of an immediate economic activity.

Raza Ahmed, a tax expert, said the FBR has reduced no tax on any input relating to the construction sector. There is an urgent need for reduction in the cost of the construction material by providing relief to the industries allied to the construction material.

He posed a question that how 25 allied industries can be operationalized if their tax liabilities are not reduced by the government to bring the prices of construction material down. No construction activity can take place unless the government makes the construction material cheaper, he stressed.

He further pointed out that the facility of non-disclosure of financial resources is limited to the purchase of only one house. It would lead to the tax evasion practices, as the buyers would show further buying in the names of their close relatives to avail the opportunity. Instead, he proposed that there should be a general extension of the facility that no source would be inquired about if one invests in the construction sector.