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Govt considering downward revision of property valuations

Govt considering downward revision of property valuations

ISLAMABAD: Barely two months after announcing the new property valuation rates in order to collect federal taxes, the government is considering revising the valuation rates of defence housing societies downwards after administrators termed them too high.

The government may lower the valuation rates of immovable properties in jurisdictions of Defence Housing Authority (DHA) by at least one-third, according to sources in the Federal Board of Revenue. They said the DHA authorities had complained that the property valuation rates of DHA were far higher than the notified rates of Bahria Town.

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They also raised the issue with Finance Minister Ishaq Dar who subsequently asked the FBR authorities to review the issue, said sources.

Haroon Akthar Khan, Special Assistant to Prime Minister on Revenue, confirmed to The Express Tribune that the matter was under consideration. However, Khan said that it has not been decided yet whether DHA rates would be lowered before the next budget or with immediate effect.

The FBR does not need parliament’s consent to revise valuation rates, as it has retained these powers under the Income Tax (Amendment) Ordinance 2016 that it promulgated to give effect to these rates. The Senate Standing Committee on Finance had objected to giving these powers to the government and instead proposed that the FBR may revise these only on an annual basis.

With effect from July 31, the federal government notified new valuation rates for immovable properties in 21 big cities of the country. The FBR-notified rates were 300% to 800% higher than the deputy collector (DC) rates. Still, these rates are far lower than the prevailing market rates.

Currently, the taxes on property transactions are paid on two valuations. The provincial taxes are paid on the base of DC rates while federal taxes are paid on the basis of FBR-notified property rates.

The FBR had notified these rates in consultation with the respective property dealers while also taking a clue from the independent assessments made by the valuers the FBR had engaged for this purpose. Dar has recently said that upward revision in valuation rates would fetch an extra Rs100 billion in tax revenues. The FBR collects withholding taxes on sale and purchase of properties in addition to charging capital gains tax.

According to the FBR notification, the per-marla value of a commercial plot in DHA-I and DHA-II is Rs2.5 million as compared to Rs900,000 to Rs1.5 million for various phases of Bahria Town. Similarly, the per-marla property valuation of residential plot is in the range of Rs150,000 to Rs550,000 in DHA phases as against Rs225,000 to Rs375,000 for Bahria Town. The Executive Meadows Phase III of Bahria Town is an exception where the rate is Rs600,000 per marla.

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Khan maintained that there was no bias, as the whole process was completed in consultation with representatives of these societies.

While the government is going to change DHA rates, it is not ready to review the valuation rates of various localities of Peshawar – the provincial capital of Khyber-Pakhtunkwha (K-P). Senators belonging to K-P have also complained to the FBR that in certain cases the notified rates were far higher than even the market rates.

The government is also finalising a tax amnesty scheme for the realty sector after revisions in property valuation rates adversely affected the business, claimed realty sector dealers. It may ask people to declare their hidden assets by paying 3% tax. The other option, which is unlikely to be implemented, is that the government may ask people to declare their assets at 5% during the first month of the scheme, 7.5% for the second month and 10% after the second month of the implementation.

Courtesy : Express Tribune



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