Real Estat set to win biggest tax amnesty: Builders reject proposed amnesty scheme

Real estate set to win biggest tax amnesty By Shahbaz RanaPublished: July 22, 2016 244 SHARES SHARE TWEET EMAIL PHOTO: memecenter PHOTO: memecenter PHOTO: memecenterThe need for the tax amnesty scheme arose after the government brought legal changes to determine fair market value of the properties by amending Income Tax Ordinance through Finance Act 2016. STOCK IMAGE ISLAMABAD: The government on Thursday agreed, in principle, to offer the biggest ever tax amnesty scheme in the country’s history, which will whiten a whopping Rs7 trillion untaxed and black money currently stashed in the real estate sector Finance Minister Ishaq Dar and representatives of the real estate sector discussed the broader contours of the amnesty scheme, which will be implemented by either promulgating a presidential ordinance or introducing a bill in parliament, said a government official. It was the third round of talks in last four days. Taxing real estate: Govt forms body to address concerns of property dealers After the talks, Dar told media that the next meeting will be held on Wednesday in which real estate sector representatives and FBR officials will share their respective property valuation rates. “On Wednesday, the two parties will reach a consensus as things are going towards positive direction,” he said. Real estate sector representatives would bring their own property valuation rates of 18 main cities and FBR officials will share their rates. On the basis of both the rates, valuers will work out ‘consensus rates’. These determinations then will become the base for giving amnesty on past transactions and calculating taxes on future transactions, said the officials. Dar ducked three repeated questions on whether the government was going to give another tax amnesty scheme and left the venue. It will be the tenth amnesty scheme in the history of the country and the third of the PML-N government in last as many years. The government’s last tax amnesty scheme to traders miserably failed, as it could bring in only 9,090 traders in the net against the claim of over one million. The need for the tax amnesty scheme arose after the government brought legal changes to determine fair market value of the properties by amending Income Tax Ordinance through Finance Act 2016. However, a move that was initially aimed at capturing actual income gains from the property transactions would end up whitening about Rs7 trillion untaxed and black money currently parked in the real estate sector. Real estate sector, govt close to breakthrough on controversial tax decisions The ill-conceived changes in the tax law immediately created two problems, putting a question mark over trillions of rupees transactions carried out till June 30 and the fair market value of the future transactions, said a senior government official who attended the negotiations. A government official told The Express Tribune that it has been decided that the government would not ask the source of income of the past transactions from investors. Abdul Rauf Alam, President Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said that this issue was not only the issue of real estate and builders associations but it was the issue of every businessperson, industrialist, importer, exporter and bureaucrat. Since the beneficiaries of the schemes are from all segments of society, the scheme is expected to pass through all the legal obstacles, said FBR officials. “The big players in speculative business in real estate and capital markets are the beneficiaries of policies of appeasement,” said eminent tax expert Dr Ikramul Haq. He said these big players, in between politicians and corrupt bureaucrats, get their share courtesy a few leading tax experts who in connivance with some stalwart in FBR provide support to tax evaders. Haq added that the whitening of assets by compromise is a great fraud depriving the country of trillions of rupees in taxes. According to the broader contours of the likely amnesty scheme the government would settle the past property transactions by charging a fixed tax of 4% to 5% of the price differential between the deputy collector rates and the new rates, which will be determined by next week. Published in The Express Tribune, July 22nd, 2016. 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CarAdvice.com.au 8 Simple Investment Rules Buffett Used to Make His Fortune The Daily Reckoning Australia How 1 Man Made 100 Times His Money after Age 50 The Motley Fool Australia Don’t believe the hype about shipping containers, say architects Domain Reader Comments (10) ALL COMMENTSREADER'S RECOMMENDATIONS faraz 15 hours ago Reply How sad that the government and Mr Dar backed off so quickly. Even though the tax would effect people like me however it is a necessary tax in order for us move forward as a nation. Property should be taxed at market rates. There should be no concessions at all. I find it unacceptable that there will be an amnesty. Mr Dar should not back down. Ordinary voters are with him so what is he afraid of. If this law is not passed now in the manner which takes into account a tax rate on the fair market value of the property then I don’t see how the issue of a large population of rich in this country will ever pay taxes. It’s only salaried people who pay taxes and the rest just take a free ride. Recommend rasheed 14 hours ago Reply Everything is still under negotiation, we will know what really happened after minimum 3-4 days. Recommend kamran 14 hours ago Reply A big fraud to the people who regularly pay the taxes. after this so called amnesty given to the black money holder, no one will ever going to take FBR seriously. i am deeply sad if it is really going to happen. Recommend Ahmed 13 hours ago Reply All corrupted money, black money, drug money, gambling money, gambling money, kickbacks are now going to be provided blanket protection by the govt…….. Recommend Observer 13 hours ago Reply I think this article is totally biased. There is no other way than a one time amnesty to make this money come under the tax net. This black economy was created by the provincial government by not increasing dc rates for decades. A genuine investor could not declare his sale price aside from the dc rate because no buyer would buy it at a price higher than that. Now this has to be fixed by the government itself by providing an amnesty. Otherwise what would you do. All the people lamenting over this are the people who want property to be cheaper. That is not the answer, home financing options and mortgage is the answer, if the property dropped by 50% the people crying would still not be able to purchase property, That is a matter of fact. Recommend pokemon1088@hotmail,com 13 hours ago Reply This is really sad that the government has capitulated so fast. The scheme they proposed originally would have been really good for this country. Recommend Ahmed 13 hours ago Reply How can FBR determine the rates? Real estate is like stock market. The face value is always far lower than the market value. Market value is determined by the demand/supply model while the face value is the bookish value. Instead of blackmailing the population, the government should take up other vistas to generate revenue either by earning it or by saving it. For instance, we could have long gotten rid of the oil-based electricity production and moved towards Coal, Wind and water based generation. This would have saved hundreds of billions of dollars in 10 years against the import bill for oil. On the other hand, Government will have to opt for the China model to some extent. Government should plant industries and factories. For instance, Government could have developed 8-10 giant factories to produce UPS, Batteries and generators so that instead of wasting billions on importing these goods, we could purchase local supplies. Also I don’t understand why the government has allowed import of cars into the country. That is the biggest leakage of dollar reserves after oil. aaaaa, scratching my hair off !!! Recommend Umar 12 hours ago Reply It’s not true at all its not all black money, I live and work in Europe I have personally invested in property in Pakistan, and there are lot of Pakistanis who have invested in Pakistan. We were all really depressed with this new tax on property because we already pay 42 percent taxes here on our salaries and then send remittances back home. There are other ways to catch black or illegal money. How can government overnight change rules which they haven’t looked at in last 30 years and make people like me and my friends suffer who have worked so hard and invested back home due to love of our motherland even though we have options here to invest which are 100 percent safe. I think government need to take this tax back and put in place other mechanisms to catch illegal or black money. I am an active membe of pakistani community here and I have been to gatherings where everybody is talking about this in a bad way and saying if Godforbid this law got implemented they will pull back all investments and they will never invest in Pakistan because of overnight changes in policies and not considering the contribution of overseas pakistani. Property is the safest form of investment in Pakistan and we overseas Pakistanis strongly condemn this black law because it will convert our investment into half overnight. We hope government will back off from this law and find other means of increasing revenues and catching illegal money. Recommend Rant 8 hours ago Reply If the government had changed a decades rule overnight and caused the real estate market to crash then the foreign Pakistanis would never invest in their country again as their confidence would be shattered. Dr Iqramul Haq is unhappy as he was not chosen in the policy making. Recommend Naeem 6 hours ago Reply @Rant: A lame argument….all they are asking is to pay tax on actual buying cost and prove money trail. You weren’t complaining when prices were going up…….which book says that prices can go only north. First they evade taxes and now they are crying ….. Recommend Leave Your Reply Below Name (required) Email Location Web Your comments may appear in The Express Tribune paper. For this reason we encourage you to provide your city. The Express Tribune does not bear any responsibility for user comments. Notify me of followup comments via e-mail Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments FAQ. =================== ISLAMABAD: The Association of Builders and Developers of Pakistan (ABAD) has rejected the amnesty scheme proposed for the construction industry, stating the association has never sought such a concession and will not need it as the business is mostly transparent. Speaking at a press conference on Saturday, ABAD Patron-in-chief Mohsin Sheikhani said the builders and developers were carrying out their business and were working hard for the betterment of country’s economy. Real estate set to win biggest tax amnesty “The federal government should support the construction industry instead of creating hurdles in the way of its growth,” he said. “We want to pay taxes according to the law.” Sheikhani pointed out that the government had raised the issue of black money at a time when the construction industry was booming. “The government should have addressed the matter earlier,” he said, cautioning any wrong step would trigger flight of capital from Pakistan, which would be detrimental to the economy. ABAD Senior Vice Chairman Arif Jeewa insisted that the construction industry had never asked for an amnesty. Instead, he said, ABAD had always promoted tax culture and it was the organisation that had given the idea of fixing the tax on the construction industry as there was not a proper mechanism. “We worked for almost four months with the Federal Board of Revenue (FBR) to fix the tax system and we are grateful to the government that it has accepted our demand of a fixed tax and included it in the federal budget for 2016-17.” Real estate sector, govt close to breakthrough on controversial tax decisions He said more than Rs3,000 billion were parked in the country but due to the government’s wrong steps investors were hesitant to disclose the wealth. He demanded that the government give a viable way so that the parked money could be part of the national economy. He also asked the government to abolish the property transfer tax imposed on the tax filers and increase the tax up to 3% for the non-filers of tax returns. ABAD Expo-2016 Committee Convener Haris Ali Mithani briefed the media about the upcoming exhibition which would be held from August 12 to 14 in Karachi and said the show would create a new history of exhibitions in the country. Published in The Express Tribune, July 24th, 2016. Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.