The housing and construction industry has urged the Central Board of Revenue (CBR) to continue levy of capital value tax (CVT) for the next few years. The 2 percent CVT on property transactions was not revenue measure but it has been instrumental in stabilising the property prices.
A sharp decline has been witnessed in the prices of property since imposition of CVT on buying and selling of plots, Munir Sultan, co-chairmen Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Standing Committee on Housing and Construction Industry told Business Recorder on Saturday.
He said that bureaucratic harassment, corruption and extortion are impeding growth of investment in the country. The irritants have made it difficult for investors to survive, therefore, these irritants need to be removed, he added. Sultan said the industry in its proposals for Budget 2007-2008 suggested the CBR to broaden the tax base instead of levying new taxes or continuing with high tax slabs.
The reduction in tax rate and its shifting to the new sectors would help improve industrial, commercial and entrepreneurial activities in the country besides generating more employment and broaden the tax-net of the country.
"The government needs to formalise economy by establishing database of all segments of the society, particularly the small businesses, 90 percent of which operate informally," he said and added that they need to be brought under the tax-net.
Sultan said that government should offer lucrative incentives under Real Estate Investment Trust (REIT) to common man to invest his life time savings in the trust. Government should also focus on areas like acquisition of land, mortgage finance, commercial free and land bank under REIT concept, he said.
Complications in the taxation system and typical mindset of the tax officials are the major bottlenecks in attracting investment in the construction sector. Huge speculative buying was witnessed in the real estate sector during the last few years. It deprived a lot of people from owning house or apartment, he said.
Bank laws should be introduced for effective recovery of loans and advances from the defaulters. While, banks should have legal powers to posses and sell the property in case the borrower defaults, Sultan said. To promote the industry, he said that bank and DFIS should extend credit facilities for balancing, modernisation and replacement (BMR) of machinery used for housing and construction industry.
Housing refinance window should be set up at State Bank of Pakistan for long term funds from multilateral agencies. Duties and taxes on major construction materials should be rationalised and reduced to make construction more affordable. Mark up on housing loan instalment for individuals should be treated as expenses in tax return. No stamp duty registration fee etc should be charged for the housing mortgage.
Federal, provincial funding and assistance should be available for infrastructure, amenities and other developments only in the planned areas. He suggested that establishment of satellite towns and the initiation of low-cost housing projects on an emergency basis to address the problem.