Govt not likely to withdraw tax on real estate purchase

[Naveed Yaseen]

By Faryal Najeeb
KARACHI: Experts of the real estate sector say that the announcement to withdraw the clause in the federal budget 2008-09 that developers and builders should pay Rs100 per sq yard on undeveloped plots sold during the year and Rs50 per sq foot on the sale of constructed property as minimum tax are rumours and yet to be officially announced.

They said that the decision to withdraw the taxes was a suggestion passed to the government by various lobbyists and associations but no verdict had been passed on the matter as yet by anyone in the government. They commented on the issue only on the basis of assumption if the levies were withdrawn and hinted nothing to confirm the matter.

Senior Vice President of FPCCI Standing Committee of Housing and Construction, Munir Sultan preferred not to judge before the decision was officially finalized. He said that the government may not reverse its pronouncement as it would bring them a bad name.

He added that in case the taxes were withdrawn from the builders and developers and passed on to the buyers, then it would actually benefit the government.

He supported his view by stating that the original announcement by the government, of taxes being charged on the builders and developers, did not include any of the housing authorities in the country, which also played an essential role in real estate sector.

Hence his calculation regarding the total area on which the builders and developers would have paid taxes would amount to around Rs300 million in revenue generation. This, Sultan commented, is “peanuts for the FBR.”

On the other hand, he added, if the same levy was charged on the buyers, the government would be able to earn in billions as a greater area would be covered including the housing authorities.

On the contrary, Chairman of House Building Finance Corporation, Zaigham Rizvi was disappointed with the mere suggestion of removing the levies as his opinion was, “unfortunately in Pakistan relevant stakeholders just need an opportunity to exploit consumers.”

He said: “Regardless of the nature of taxes imposed on them, they very tactfully pass it on to the consumers and at the end of the day; it is the consumers who are actually paying the taxes imposed on the corporate sector.”

The result of the levy on real estate was planned to benefit in two ways. One was to document the economy and the second was revenue generation. “I don’t really understand how our government thinks because at the end of the day, it is the lobbies working underhand that win over,” he stated.

He continued: “With the real estate levies being withdrawn, and as rumoured would be taxed as Federal Excise Duty on the buyer, the revenue would continue to be generated for the economy, but the documentation of the economy is going to be put on hold.”

Rizvi criticized that all over the world, the government plans revenue first and then expenditure, however, Pakistani government plans expenditure first and then thinks of ways to generate revenue which, he added, is leading to Pakistan remaining exactly where it was some years ago.

http://www.thenews.com.pk/daily_detail.asp?id=119452