ISLAMABAD: The Senate Standing Committee on Finance approved an amendment to Income Tax Bill 2016 to shift the power of valuing property prices from the State Bank of Pakistan (SBP) to the Federal Board of Revenue (FBR).
The idea was originally floated by the Ministry of Finance when the latest budget was being presented. However, the Senate committee opposed the suggestion at that time and the government decided to appoint independent valuators from the SBP.
The amendment, presented to the Senate committee by the FBR Chairman Nisar Muhammad Khan, sought to empower the FBR to value property prices at every major deal as it deemed fit.
However, the committee forwarded the amendment to the Senate after proposing a few changes. If approved, the amendment will be forwarded to the National Assembly.
“The amendment in the law has to be that the FBR will not have the powers to value every property deal and the change in property price will also not be as deemed fit by the FBR,” Committee Chairman Senator Saleem Mandviwalla said.
Moreover, the changes will be made on an annual basis, no matter what the month, so that everybody knows the official rate in that area, he said. “This will also limit FBR’s powers to value each and every deal.”
The amendment was the subject of intense discussion. Members of the committee who strongly opposed the idea — including senators Ilyas Bilour, Mohsin Aziz and Sardar Fateh Muhammad Hassani — accused the FBR of playing politics with the system.
“We are already fed up with your fake and incorrect notices. And now you want to empower the FBR to make something in every property deal,” Senator Bilour said. “Like other taxes, the FBR would impose their rates at one deal and have a different attitude at other deal. Who is going to ensure the transparency?”
Mr Mandviwalla was also dissatisfied. “So we are back at square one. It was decided at the time of budget this year that tax collector should not also be the valuator.”
Discounting the political angling of the issue by Kamil Ali Agha of PML-Q and Mushahidullah Khan of the PML-N, Mr Bilour, Mr Aziz and Senator Mohsin Leghari suggested several changes in the proposed amendment.
Mr Leghari pointed out that deputy commissioner (DC)-approved rates of property were a provincial subject, whereas the SBP valuators also recently revised the rates after lengthy meetings with the private sector.
“Now we will have two property rates in the country — one from DC and other from the FBR. So how you assume that things will not end up in courts,” he asked the FBR chairman.
DC rates are benchmark, lowest property price in any area for taxation.
Some members of the committee suggested that the decision would open up another door of underhand dealings in the FBR.
Our Staff Reporter from Karachi adds: The FBR is ready to bring the valuation of property on a par with actual market prices in case any anomaly exists in the rates notified by the central revenue collection authority.
Addressing the members of the Association of Builders and Developers of Pakistan (ABAD), FBR Member (Inland Revenue Policy) Rehmatullah Khan Wazir said the purpose of the valuation of property is to bring black money back into the mainstream of the economy.
According to an estimate, Rs6-7 trillion is the size of the construction and real estate sectors.
The FBR knows that such a huge amount cannot be brought into the tax net with a single stroke of pen, he said. However, the process must be initiated, he added.
The FBR official said ABAD had proposed the fixed tax for the construction sector but the law cannot be changed or set aside on whims. However, he said the National Assembly can change the law in case ABAD is able to convince the opposition parties.
He noted that the opposition parties are against money-whitening schemes. “I will again advise ABAD to take all the opposition parties into confidence regarding amnesty schemes,” Mr Wazir said.
Regarding whitening of money, he said the FBR allows “work back” of up to Rs40 million if a builder pays Rs10m in tax. He assured ABAD members that he will work for a higher “work back”. He also asked them to come up with a viable proposal, saying the FBR does not want to create hurdles for businesses.
Mr Wazir said no confusion exists about property valuations, adding that only capital gains tax has gone up and the registrar can calculate it according to the table provided by the FBR.
Earlier, acting chairman of ABAD Arif Yousuf Jeewa said the tax collection from builders/developers will surpass the target of Rs25 billion. He demanded that the FBR should clear any ambiguity about property valuations so that builders/developers can move on with their schemes.
ABAD Patron-in-Chief Mohsin Sheikhani said the construction market has nosedived during the last three months due to the confusion about the valuation of property. This has also led to the stagnation of property registration, he added.