FBR Announces Property Valuation Increase to 90% in July 2024

FBR Announces Property Valuation Increase to 90% in July 2024

Islamabad, June 23, 2024 – The Federal Board of Revenue (FBR) has announced a significant adjustment to property valuations in major Pakistani cities. This move, aimed at boosting tax collection, will see property values increase from 75% to 90% of their estimated market rates.

The FBR informed the Senate Standing Committee on Finance about the planned revision, which is expected to be implemented through a notification issued in July 2024. This announcement comes alongside the FBR’s intention to introduce a simplified tax scheme for retailers, following the failure of the voluntary Tajir Dost Scheme.

Budget Approval and Property Valuation Increase

Senator Faisal Vawda, following a Senate panel meeting, confirmed the government’s commitment to passing the budget “at all costs.” Details regarding the property valuation increase were provided by FBR’s Member Inland Revenue (IR) Operation, Mir Badshah Wazir. He explained that the revision will be implemented “soon after approval of the budget 2024-25.” An SRO (Statutory Regulatory Order) is expected to be issued in July, officially raising the FBR’s valuation rates to 90% of market value.

Tax Base Broadening Efforts

The Senate meeting also saw discussions surrounding broader tax base initiatives. Senator Sarmad Ali called for the abolishment of the 10% General Sales Tax (GST) on newsprint, arguing for support to the already struggling media industry. The Senate panel subsequently recommended the removal of this tax.

The FBR highlighted its efforts to expand the tax net, citing a 1.5 million increase in new tax filers during the outgoing fiscal year. However, Senator Anusha Rahman emphasized the need for more drastic measures. She proposed stricter enforcement, suggesting incarceration for non-filers.

Tax Collection Challenges and Transparency Concerns

The number of existing tax filers was reported to be around 4.5 million. However, questions were raised regarding the number of “nil filers” – those who file tax returns but report no taxable income. While estimates suggest this figure could be over 30%, FBR officials declined to provide specific details.

The FBR acknowledged challenges related to tax evasion, reporting the unearthing of Rs 756 billion in alleged tax frauds involving fake invoices and the arrest of 70-80 individuals. The steel sector was identified as a potential source of such fraudulent activity, with scrap steel allegedly used to create fake invoices, causing an estimated annual loss of Rs 60-70 billion to the national treasury.

Senator Anusha Rahman further highlighted the issue of tax collection inefficiency. She cited an example of a retail shop in Lahore that collected taxes from customers but failed to remit them to the FBR. FBR members attributed this to staffing shortages, acknowledging a shortfall of 6,000 positions out of a sanctioned workforce of 18,000. They expressed a need for assistance in filling these vacancies.

Criticism of FBR’s Performance

The Senate Standing Committee Chairman, Saleem Mandviwala, criticized the FBR’s performance in documenting previously untaxed sectors. He pointed out a lack of progress over the past twelve years, despite ongoing promises to integrate these sectors into the tax net. Senator Farooq H Naek echoed this sentiment, suggesting that the FBR has primarily focused on issuing tax notices to those already compliant with tax filing obligations.

The FBR’s announcement of increased property valuations and its ongoing efforts to broaden the tax base represent attempts to address Pakistan’s revenue generation challenges. However, concerns regarding efficiency, transparency, and the effectiveness of past initiatives remain. The coming months will be crucial in determining whether these latest measures translate into tangible improvements in tax collection and a more robust national economy.