The amendment in FBR income tax ordinance 2001 caught every person with short term speculation and black money in to big surprise.
For such kind of people it is a big nightmare that federal bureau of reserve (Federal Board of Revenue) FBR will value the properties at fair market rate. The entire real estate market is supposedly in a state of shock, the business is completely shut down in major housing units.
According to the news shared on the news channels, real estate developers and builders don’t want to pay the increased amount of taxes for residential and commercial properties in form of real estate projects. Real estate brokers might demand same changes in the tax policy that are imposed on them.
A major amendment made in the taxes has been made in the FBR income tax ordinance 2001 through the financial proceed of 2016. From now on property will be evaluated as per the new method set up by the state bank of Pakistan. Properties will not be evaluated according to the Deputy Commissioner rate. Property rates will be determined by the valuers appointed by the state bank of Pakistan.
These valuers will be referred by the federal board of reserves’ commissioner from department of revenue. Anyone who will buy property will have its value evaluated according to the set rules by appointed valuers. Government has also applied all other taxes from 1st July 2016 that real estate industry has been burdened with.
To avoid the newly proposed amendments in the taxes, percentage of which is different for tax filers and non-filers. The situation regarding the sale and purchase of property is the same in all cities of Pakistan. But there are chances that the situation will get better in the near future. It seems that property buyers can wait till the rates are dropped and this situation does not seem to push them to make purchases.
It is believed that these changes will bring the black money in tax net. For the purpose of discouraging tax elusion, evader will be bounce to pay a double amount of tax payable as additional tax and penalty. Depending upon the situation tax evader will also face 2 year jail term and prosecution.
The experts who have planned the new method for evaluation of property in Pakistan believe that the most recent modifications will restrain billions of tax evasion done in terms of purchasing property. They also believe that this decision might encourage investment in other sectors. The Gross Domestic Potential (GDP) of Pakistan will also grow and many new job opportunities will be introduced.
There are visible signals that strikes are being organized in some big cities of Pakistan by the real estate agents. The interesting rumor is that the two big amendments deject foreign remittance in Pakistan. In case if any overseas Pakistani send his money in Pakistan through the procedure of normal banking channel than the money is considered as white money purely.
Previously if any overseas Pakistani used his white money to buy any property in Pakistan and get it recorded at deputy commission (DC) rate, he was consciously or unconsciously converting his white money into black.
The negotiations held among the government of Pakistan and the legislature of real estate associations regarding the changes made in the FBR income tax ordinance 2001 are successful. Government did not take all the amendments back and also shown some compliance to charge new taxes. Decision regarding taxes will be finalized after consultation of stakeholders. But it is still not yet finalized.
No doubt that the criticism is true that the amendment in FBR’s attempt in order to stop black money entering the market is a remarkable gain on the original amount. This is not something that a rational mind will support. But on the other hand it is also true that the introduction of such an immense revamp on a critical base and no expectation of any kind of resistance would be insane.
When it comes to financial matters flexibility is shown from every side but these negotiations were not lengthened unnecessarily. For instance after the changes in FBR income tax ordinance 2001 in order to obstruct black money caused a sudden drop in the activity of sales and purchase in the real estate market. And due to the implantation of these modifications will have critical consequences.
Due to the amendments in the FBR income tax ordinance might suffer a huge amount of income tax amount which is collected from FBR might drop off. This can make things worse and this flight of capital can have a catastrophic all affect on our Pakistan’s economy. As we all are well aware with the situation of our country’s economy.
As per the news of local news channels and media, FBR’s procedure to determine the real estate sectors fair market value according to the criteria set by the state bank of Pakistan has been rejected by the finance minister Ishaq Dar. As stated in the details, FBR is not going to check any of the transactions made by real estate in the past.
According to the new rules set to determine the real estate fair market value will be valid for the only one year. In other words each year rates will be increased according to the set formula. Finance minister Ishaq Dar has invited property dealers from 18 cities in order to share the fare market value chart. This chart will determine the property rates in the whole country. The fair market rate from around 18 cities will be sufficient for assessing real estate market value in the country. And it should also be acceptable for the FBR.
This situation seems to be a fairy tale, where the entire damaged system can be fixed with just waving a magic stick. But it is not that easy as many dealers of the major cities of Pakistan state that not even a single property has been bought or sold since the amendment in the FBR income tax ordinance has been made.