Karachi, February 18, 2024 – The Federal Board of Revenue (FBR) is gearing up to update immovable property valuations, aligning them with fair market prices, in response to recommendations from the Federal Tax Ombudsman (FTO).
The move aims to enhance transparency in transactions involving immovable properties.
Sources within the FBR revealed that the federal revenue body has initiated the process of revising property valuations, aiming to address deficiencies highlighted by the FTO and establish a standardized approach to determining fair market property values.
The FTO’s recent report, titled “Own Motion Case NO: 0033/2023 regarding Anomalies in Valuation of Immovable Properties,” has brought attention to significant shortcomings in the FBR’s procedures for determining fair market property values. The report underscores the lack of standardized processes within the FBR, prompting the need for a comprehensive revision.
According to the FTO report, the FBR is authorized to establish fair market values of immovable properties under Section 68(4) of the Income Tax Ordinance. The current valuation process is part of the taxation reform agenda, specifically the Pakistan Raises Revenue Projects (PRRP), carried out in collaboration with the World Bank. The objective is to develop uniform valuation rates for immovable properties.
The Own Motion investigation, initiated under Section 9(1) of the FTO Ordinance, 2000, revealed significant anomalies, inconsistencies, and discrepancies in property valuations across Rawalpindi/Islamabad. The report attributes these issues to the absence of a written Standard Operating Procedure (SOP) guiding valuation committees.
The report emphasized the necessity of three main approaches in property valuation: the Cost-based approach, Comparison approach, and Income Capitalization approach. Due to the absence of an SOP, the FTO recommended referring to the International Valuation Standards (IVS) formulated by the International Valuation Standards Council (IVSC).
The recommended IVS principles stress the need for standards to be principles-based, ensuring valuers adhere to principles of integrity, objectivity, impartiality, confidentiality, competence, and professionalism. Valuers should possess the necessary technical skills and knowledge, disclose published valuation standards, and follow all applicable requirements.
The FTO made several recommendations to rectify inconsistencies and bring uniformity to property valuation rates across the country. These include the functionalization of the ‘Directorate General of Immovable Property,’ the development of an SOP by the Member (Policy) FBR containing suitable valuation methods, the formation of a “standing anomaly committee,” and the hiring of competent valuers. The report aims to streamline the property valuation process, ensuring fairness and consistency in determining the fair market value of immovable properties.
