Association of Builders and Developers of Pakistan (ABAD) Tuesday proposed deferment of amendments made in Income Tax Ordinance, 2001 regarding taxation of real estate sector till next federal budget.
During the proceedings of a sub-committee meeting of National Assembly Standing Committee on Finance with Saeed Ahmed Khan in the chair, the representatives of builders association ABAD, Mohsin Sherani, Arif Jeeva and others, said there was shortage of 8.7 million housing units in the country and the federal government could not notify the valuation rates without taking the provinces into confidence in the aftermath of 18th constitutional amendment.
Raja Mazhar from Karachi said that they had faced a loss of Rs 500 million alone in Sindh so there was a need to resolve this crisis like situation. The representatives of ABAD said that the controversy created by recent amendments in Income Tax ordinance should be resolved in a way where all the stakeholders eventually come out as winners.
If not handled properly,they warned, this action of government, although taken in the right direction yet without proper and prior planning and consultation with all stakeholders, will have negative repercussion for economy and investments for Pakistan in times to come.
Since this amendments will effects each and every present and prospective property owner/ buyer in Pakistan it may also become one of the main issue for next general election. Before finally deciding the issue government must keep two things in mind. One, that after agriculture, construction is second largest employer of unskilled labor in Pakistan and Secondly Construction is treated as a mother industry which is reason for running more than seventy Allied industries. In handing such issues the Government of the day must not narrow down their thinking to revenue generation only m but it has to look at the largest prospective of provident housing to common man of Pakistan.
They proposed that the amendments may be deferred upto next budget and Ministry of planning may be involved to formulate a long term Policy to achieve the objectives.
During this period all stake holders must be taken on board including federal / provincial governments for formulation of effective and long lasting policy. A decision must be reached unanimously or else by 3/4 majority.
After July 1 2017 all conveyance Deeds must be registered at Fair Market Value, they proposed. The federal government may charge one percent withholding tax, advance income tax from both (buyers /sellers) and Capital Gain Tax. Prevailing Federal Government Taxes charged by FBR on property transaction are approximately 3% to 6% of FBR Valuation Table excluding Capital Gain Tax. The federal Government will charge 3% to 6% of FBR Value as per today's valuation or 1% of Fair Market Value whichever is higher. This may result in substantial increase in government revenue.
The total Provincial and Local government Taxes ie Stamp Duty, Registration Charges, Capital Value Tax, Town Tax must not exceed 1% of Sale Deed. The prevailing charges are 7.5% of Sale Deed amount as per D.C rate which is inclusive of Registration Charges, Capital Value Tax, Town Tax and will be brought down to 1% proportionally. The Provincial Government may charge 7/5 of D.C. Value or 1% of Fair Market Value whichever is higher. The same practice is being done for Properties in Real Value whichever is higher. The same practice is being done for Properties in Real Estate Investment Trust (REIT), they proposed.
One percent additional tax may be charged from registered tax payer to the extent of amount they are not able to reconcile in wealth statement for purchase of property. NTN holders interested in declaration of cash assets may be given a onetime chance by charging 1% tax for the first two months and 2% for next two months and 3% percent for two months. The scheme must be only available for the people engaged in real estate business and already having NTN numbers. Specific scheme must be designed for different sectors keeping their requirement in view.
No sources of funds should be asked for booking of under construction flats/ shops houses for a period of five years from individual buyers or else one house/ apartment may be allowed to be bought by every Pakistani without the amount be reconciled in wealth statement up to the value of 50 million. This will encourage investment in construction industry. Same type of facility was given for investments in shares through stock exchange for a period of two years. This facility may be only be provided for registered NTN holders, they proposed.
Attention of the committee was invited to the Article 141, 142, 143 and 144 of the Constitution, which provides that Federal Legislature is empowered to impose tax on matters which are mentioned in the Fourt Schedule of the Constitution, which prescribe Federal Legislature List. Any matter which is not mentioned in the Federal Legislature List (as available in Fourth Schedule ) would fall within the ambit of Provincial Assembly. In this context reference is invited to the Entry No 50 of the Fourth Schedule to the Constitution: "50. Taxes on the capital Value of the assets not including taxes on immoveable property." Thus the Entry No 50 of the Fourth Schedule provides that Federal legislature shall have no to impose any tax on immoveable property in including any tax on capital gains, ABAD representatives added.