Islamabad, October 13, 2023 – The Federal Tax Ombudsman (FTO) has issued a directive to the Federal Board of Revenue (FBR) aimed at rectifying valuation deficiencies and inconsistencies in the assessment of immovable properties, particularly in affluent areas.
The move comes after a thorough examination revealed significant under-valuation of properties in comparison to prevailing market rates.
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In response to the directive, the FBR has been instructed to reevaluate the valuation table, incorporating the cost of built-up structures. Furthermore, it is mandated that housing schemes in upscale localities should be appraised on a real-time basis.
An example of valuation issues was uncovered in the rates proposed by the Regional Tax Office (RTO) in Multan. These rates were found to be lacking in accuracy, failing to reflect the actual market values of properties. Additionally, there was a noticeable absence of clear categorization for residential, commercial, and agricultural properties. Real estate schemes introduced by developers were also omitted from the valuation table, a matter that the RTO has admitted to and has committed to addressing in the forthcoming valuation table to be submitted for FBR notification.
The FTO’s investigation, initiated on its own motion, was prompted by discrepancies and deficiencies in SRO 1267(1)12022 dated August 1, 2022, which was perceived as one-sided and deficient. This, in turn, hindered the transparent and equitable implementation of tax laws within the real estate sector. These issues not only resulted in considerable revenue loss but also created opportunities for misuse and discretion by provincial and FBR field staff.
The existing valuation process for immovable properties is part of the taxation reform agenda, known as the Pakistan Raises Revenue Projects (PRRO), which is carried out under the guidance of the World Bank. This initiative seeks to develop a uniform valuation table for immovable properties, and it is an ongoing process that requires periodic review by respective Regional Tax Offices (RTOs). SRO 334(1)12022 dated March 2, 2022, was notified by the Board based on recommendations from the RTOs.
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The FBR is expected to ensure that the FBR Policy Wing (IR) and CCIR, RTO in Multan revisit the valuation tables to address the deficiencies and inconsistencies, as has been committed to by RTO, Multan.
The directive by the FTO marks a significant step toward improving transparency and fairness in the real estate sector’s taxation system, ultimately benefiting both the government’s revenue collection and the general public. This development underscores the commitment to addressing issues that have long been a concern in the sector.
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