Islamabad, May 1, 2024: The Federal Board of Revenue (FBR) is gearing up for a significant overhaul of property valuation tables, aiming to bring them closer to fair market value (FMV) starting July 1, 2024.
This move comes in response to growing concerns about the significant gap between current valuations and actual market prices, leading to substantial tax evasion and distortions within the real estate sector.
Industry bodies like the Pakistan Business Council (PBC) have long advocated for revised valuations, highlighting the negative impact of under-declared property values. Their recent proposal to the FBR emphasizes the need for a broader tax base and a crackdown on prevalent revenue leakages in the real estate market.
Experts point out a significant discrepancy between FBR valuations and market realities. This disparity allows for tax evasion and money laundering through under-declared property transactions. “The current system creates massive tax losses and facilitates the parking of undeclared wealth in real estate,” stated a senior PBC official, underlining the distortionary effect such practices have on the formal economy and property market dynamics.
The PBC’s proposal champions a shift towards utilizing reliable online platforms to determine more accurate property valuations. This data-driven approach aims to replace outdated methodologies that contribute to the underestimation of property prices. By leveraging online resources, the FBR can gain a more comprehensive understanding of market trends and ensure valuations reflect true market value.
The PBC has also drawn attention to the underutilization of existing legal instruments designed to combat under-declaration. Section 230F of the Income Tax Ordinance, 2001, empowers the FBR to acquire properties at double the declared transaction value if the sale occurs within six months. This provision aims to deter tax evasion by imposing a significant penalty on under-declaration.
However, the PBC highlights lax enforcement of this section, allowing tax evaders to exploit the loophole with minimal consequences. Their statement emphasizes the need for stricter implementation of Section 230F alongside the revised valuation tables.
The FBR’s planned revision of property valuations is a positive step towards a more transparent and efficient real estate market. By aligning valuations with fair market value, the government aims to broaden the tax base, generate additional revenue, and deter tax evasion. Collaboration with industry bodies like the PBC will be crucial for a smooth implementation process. Additionally, ensuring stricter enforcement of existing legal frameworks, such as Section 230F, will further strengthen the system and discourage tax avoidance practices.
This move is likely to impact various stakeholders within the real estate sector. Property buyers and sellers will need to adjust to the revised valuations, potentially leading to higher tax liabilities. However, a more robust tax collection system will benefit the economy as a whole, contributing to increased government revenue for public services and infrastructure development.
