Karachi, May 21, 2024 – The Federal Board of Revenue (FBR) is considering imposing a new tax on the real estate sector, aiming to tap into an estimated Rs 500 billion.
This initiative comes in response to the substantial under-valuation prevalent in the real estate market.
Sources within the FBR have indicated that the revenue body is actively reviewing the current tax rates applied to real estate transactions. The focus is on capturing the extensive untaxed potential in this sector, which has been largely underreported and under-taxed.
The Pakistan Business Council (PBC) has been a vocal proponent of this change. In its budget proposals for 2024-25, the PBC highlighted the real estate sector’s untapped tax potential, estimating it at approximately Rs 500 billion. The council suggested that even a 10% realization of this potential could generate Rs 50 billion in revenue.
“The real estate sector represents a significant portion of untaxed wealth in Pakistan. Proper valuation and taxation could yield substantial revenues for the national exchequer,” stated a source from the FBR. The proposed tax reforms aim to address these disparities and ensure that the sector contributes fairly to the national economy.
In addition to the real estate tax, the government is also looking to revise the agriculture income tax through new legislation. This move targets the prevalent issue of parking and whitening untaxed and illicit money within the agricultural sector.
The PBC has put forward several recommendations to improve the collection and enforcement of taxes in the agricultural sector:
1. Enforcement of Tax Laws: The PBC recommends that if taxes are not paid to provincial authorities, the federal government should have the authority to collect them. This measure is intended to close loopholes and enhance compliance.
2. Wealth Reconciliation: The PBC suggests that if taxes are paid to provincial authorities, taxpayers should file a federal tax return along with a wealth reconciliation statement. Currently, wealth statements are mandatory, but the FBR has not been enforcing this requirement rigorously. The PBC believes strict enforcement is necessary to ensure transparency and accountability.
These proposed changes are part of a broader strategy to increase tax revenue and improve fiscal stability. By targeting the real estate and agriculture sectors, the government hopes to address long-standing issues of tax evasion and underreporting.
As the FBR moves forward with these considerations, stakeholders in the real estate and agriculture sectors are advised to prepare for potential regulatory changes. The proposed reforms, if implemented, could lead to a more equitable tax system and a significant boost in government revenues.
The upcoming budget will likely provide more details on these initiatives, setting the stage for a comprehensive overhaul of Pakistan’s tax landscape.