Valuation of property; ABAD, realtors reject amendment to Income Tax Ordinance

KARACHI: The Association of Builders and Developers of Pakistan (ABAD) and the real estate sector have outrightly rejected amendment in the Income Tax Ordinance 2001 (ITO) and addition of a new sub-section to Section 68 regarding valuation of immovable property through Finance Act 2016 and have demanded to withdraw this draconian mechanism for valuation of immovable property, which has created panic in investors and flight of capital from construction and real estate has started.

Talking to mediapersons at ABAD House after an emergency meeting of ABAD members and representatives from leading real estate firms, a spokesman of ABAD said that leading real estate firms have appealed to ABAD to raise this issue for the interest of the industry and general public. He said that the ABAD is the biggest representative platform of construction industry and the government should take ABAD in confidence before announcing any policy related to the construction industry.

He told that it was a welcome step of the government that it has accepted proposals of ABAD regarding fixed tax on construction industry as this decision will contain possible corruption. Unfortunately, after this decision the government all of sudden changed own mind and first of all proposed amendment to section 68 (2) of the Income Tax Ordinance 2001 giving discretionary powers to tax officials to fix fair market value of immoveable property, which was vehemently opposed by the ABAD because if this amendment comes into effect, new vistas of corruption will open, which cannot be acceptable to any patriotic Pakistani, he told adding that later on the government all of sudden inserted a new sub-section 4 in Section 68 of ITO stating; “Notwithstanding anything contained in sub-section (1) and (3) the fair market value of immovable property shall be determined on the basis of valuation made by a panel of approved valuers of the State Bank of Pakistan”.

He said that it looks that some people are trying to derail the country’s economy, which has come into swing after many years of chaos and uncertainty. We were of the view that if this new mechanism for valuation of immoveable property is implemented many legal complications will arise and consequently there is possibility of collusion between valuers and Tax officials for financial incentives which may result in loss of revenue to exchequer,  the valuation of different properties by different valuers may result in differing values resulting indifficulty of benchmarking as the process of valuation is judgmental, new procedure may result in unnecessarily excessive litigations as the taxpayers as well as tax officials may disagree with valuations of each other’s appointed valuers due to no benchmarking but now it is very clear that the flight of capital from Pakistan has begun due to this new law, which is evident that some people are trying to strengthen other countries by shifting money from Pakistan’s construction and real estate business, he said adding that value of United Arab Emirates (UAE) Dirham has been increased by Rs. 1.5 during last week.

The spokesman further said that not only builders and developers and people related to real estate will be effected by this law but general people will be most effected as people involved in construction and real estate business are nearly 30 percent while rest of 70 percent are from general public. He said that if the government wants to increase tax collection, there are many sectors untaxed and the government could also increase taxes on property gradually but the government should take any decision regarding private sector after taking all stakeholders into confidence and should desist from taking ant-economy and anti-people decisions.

He said that this new law is also against the spirit of the National Housing Policy 2001. He lamented that Pakistan needs revival of economy and builders and developers are contributing more than 2 percent to the GDP but complexity created by the government through amendment to Income Tax Ordinance will slow down pace of construction activities, which will not only lead to unemployment as this sector is providing jobs to thousands of skilled, semi-skilled and unskilled workforce but builders, developers and investors will have no way other than to wind up their businesses.

He urged the government to withdraw this unnecessary law immediately to save construction industry and the economy of the country.

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