Karachi, April 23, 2024 – The Federal Board of Revenue (FBR) is reviewing a pivotal proposal from the Pakistan Business Council (PBC) aimed at enhancing property valuations to align closer with the fair market value (FMV).
This move is expected to substantially broaden the tax base and seal prevalent revenue leakages within the real estate sector.
The PBC’s proposition comes in response to growing concerns over the disparity between current FBR property valuations and actual market prices. Experts believe that the under-declaration of property values has become a routine method for evading taxes and laundering money through real estate investments.
“The disparity between the FBR and market values of properties is significant. This not only leads to massive tax losses but also facilitates the parking of undeclared wealth in real estate,” noted a senior PBC official during the proposal submission. The council highlighted that such practices undermine the formal economy and distort property market dynamics.
Central to the PBC’s recommendations is the utilization of reliable online platforms to gauge more accurate property valuations. This modern approach aims to replace the outdated valuation methods that currently contribute to the underestimation of property prices.
Additionally, the PBC has pointed out the underutilization of existing legal frameworks designed to combat these issues, specifically citing Section 230F of the Income Tax Ordinance, 2001. This section grants the FBR the power to acquire properties at twice the declared transaction value if done within six months of the sale, aiming to deter under-declaration.
However, implementation has been lax. “The powers under Section 230F are rarely exercised, allowing tax evaders to continue exploiting this loophole with little to no repercussions,” the PBC statement read.
Tax experts and economists have largely welcomed the proposal, emphasizing that aligning tax values with actual market prices will not only ensure fair taxation but also discourage the influx of black money into the sector. Dr. Amjad Saqib, an independent economist, commented, “This is a much-needed reform. The real estate sector has long been opaque, serving as a haven for unaccounted funds. Correcting property valuations could be a game-changer for Pakistan’s economy.”
Critics, however, argue that sudden increases in property valuation could lead to a temporary slowdown in the real estate market, potentially increasing the cost of housing and affecting affordability for middle and lower-income families. Real estate developers have expressed concerns about potential impacts on investment inflows to the sector.
In response, the PBC suggests a phased implementation of the new valuations to mitigate any abrupt economic impacts. “A gradual adjustment period will allow the market to stabilize and adapt to the new norms without significant disruption,” a PBC spokesperson elaborated.
As the FBR deliberates over this proposal, the outcome is eagerly anticipated by various stakeholders. If accepted, these measures could mark a significant step towards transparency and fairness in Pakistan’s real estate market, aligning it with international standards and boosting investor confidence.
The FBR has yet to announce its decision but has confirmed that a detailed review of the proposal is underway. The potential for implementing these changes represents a pivotal moment for fiscal reform in Pakistan, aimed at fostering a more accountable and robust economic landscape.
