ISLAMABAD: A high-level meeting will be convened on Monday to consider various proposals, including amnesty scheme for determining fair market value of immovable properties across the country to raise revenue from the sector.
In the budget 2016-17, the government has introduced an amendment in the income tax law that the fair market value of any property to maximise capital gains tax will be determined by a panel of approved valuers of the State Bank of Pakistan.
However, the decision was not supported by any rules as how to implement the decision.
An official source in the FBR said that Finance Minister Ishaq Dar has ordered the tax authorities to review various proposals of the stakeholders regarding fixing values of properties for the purpose of taxing.
Dar asked the FBR chairman to attain views of all stakeholders in the matter at the earliest.
Several proposals were submitted to the FBR for framing rules for the implementation of the decision. However, the one proposal submitted to Finance Minister Ishaq Dar for consideration was of a Karachi-based chartered accountant Ashfaq Tola, who was a former member of the tax reforms commission.
Mr. Tola listed several issues, which might arise because of changes in the procedure for the valuation of immovable property.
At the outset, he said there will be collusion between valuers and tax officials for financial incentives, which may result in loss of revenue to exchequer. He further said the valuers and tax officials might also collude to understate the value of a property to reduce their capital gains tax liability.
The valuation of properties by different valuers might result in difficulty of benchmarking as the process of valuation is judgmental.
The change procedure may also result in unnecessarily excessive litigation as the taxpayers as well as tax officials might disagree with valuations of each other’s appointed valuers due to no benchmarking.
Three proposals are on the table for consideration in the meeting on Monday to maximise capital gains tax.
According to a proposal, government might announce a onetime amnesty to declare property at actual cost and pay taxes at 2pc or 3pc on the amount of difference between declared cost and actual cost.
Such differential amount may be added to declare assets after availing such scheme and payment of taxes. Also, if the property is held for more than five years, no such taxes may be paid.
The second proposal suggested a fixed tax regime for the immovable property. Under this, it was suggested to introduce a fixed tax of 3pc to be paid at every time of sale of property, which is to be charged on amount of difference between collector value and market value.
Under the third proposal, it was proposed that provinces must be convinced to revamp values in valuation table notified by the collector of the district under section 27-A of the Stamp Act, 1899 at par with the current market values. In cases where the difference between values as per valuation tables and market value is substantial, the values might be gradually increased over a period of two to three years.
Published in Dawn, July 15th, 2016