Lahore: Punjab Finance Minister Makhdoon Hashim Javan Bakhat on Monday, during his Budget 2020-21 unveiling speech, revealed that the provincial government had decided to postpone the application of rates notified in the valuation tables for immovable properties for a period of one year starting July 1, according to a news source.
The valuation tables were introduced in July 2016 by the Federal Board of Revenue (FBR) with an intent to minimize difference in the market rate of properties and the values quoted (according to rates notified in Deputy Collector (DC) rate) in sales’ documents. This difference in value was believed to be a way to evade taxes, which was collected on properties’ DC rate and not on the rate at which it was actually sold.
When finalised in 2016, the FBR, in consultation with stakeholders from the property sector, announced to increase the rates notified in valuation tables every year to bring it at par with the market rate. Not to mention that the FBR valuation tables are used for collection of tax applicable at the federal level, while the provincial governments use the respective DC rates to determine taxes they collect at provincial level.
In response to the formation of the FBR valuation tables in 2016, the provincial governments also announced upward revision of DC rates for their respective provinces. While this was meant to help government, both central and provincial, increase their revenue collected via property transactions, the opposite of it was seen, where due to major rise in property tax post the revision in DC rates and formation of FBR valuation tables, investors decided to bail out the real estate market, which brought the tax share from property sector down by a huge margin.
In the past, the Punjab government stated that the new tax regime had ‘badly affected’ the tax collection from the real estate sector. It, however, couldn’t resume the tax system that was in place before July 2016. Now, the provincial government has decided to postpone the implementation of FBR valuation rates for one full year. This will help measure the impact as well as set the foundation for a new and improved tax collection system for sale and purchase of immovable properties.
Zameen News will keep you posted on related developments, so stay tuned!