Immovable property: CVT to be halved in fiscal year 2011

[Lahore_Real_Estate]

SOHAIL SARFRAZ
ISLAMABAD (May 2010): The government has decided to reduce the rate of capital value tax on immovable property from 4 to 2 percent by applying uniform rate of tax on all sizes of plots in the coming budget. Besides the tax exemption on all types of plots will be withdrawn.

Consolidated budget deficit for the next fiscal year 2010-11 that has been estimated at Rs 703 billion will be bridged through internal and external borrowing, Economic Advisory Council (EAC) and Revenue Advisory Council (RAC) meeting was informed here on Saturday.

Despite public holiday, Economic Advisory Council and Revenue Advisory Council met under the chairmanship of the Advisor to Prime Minister on Finance and Revenue to discuss budgetary proposals and other issues concerning the economy.

Official sources said the budget deficit has been worked out on the basis of Rs 1.711 trillion tax collection target to be assigned to the Federal Board of Revenue; However, Revenue Advisory Council termed the proposed tax collection target as more ambitious.

The members of the Revenue Advisory Council were of the view that proposed tax collection target should be set on realistic basis and proposals in this regards estimates it at Rs 1.600 trillion for the next fiscal year 2010-11, official sources added. In case the proposed tax collection target of Rs 1.711 trillion is revised downward, the budget deficit target would go beyond Rs 800 billion for the next fiscal year 2010-11, added the official sources.

It has been decided in the meeting that Revenue Advisory Council (RAC) will meet again on Sunday to deliberate on bringing tax collection target to a realistic level. It was also informed in the meeting that debt servicing to consume Rs 672 billion next fiscal year as bringing public debt a sustainable level is need of the hour.

During the meetings members of the EAC and RAC were of the view that education and health sector should be exempted from VAT to enable the masses get quality healthcare and education facilities in the private sector. It was also informed to the meetings that essential food items in loose shape and life saving drugs to remain exempt from VAT, however, few food items sold in brand name and packing would be subject to 15 percent VAT in the next fiscal year.

The Economic Advisory Council (EAC) was informed that law and order situation, energy crisis, enforcement of VAT, reduction in poverty, inflation and reduction in public debt to be major challenges for the government in the next fiscal year 2010-11, official sources said.

The EAC was also informed that next budget should support macro-economic stabilisation and should be growth-oriented mainly benefiting poor of poorest. The meeting also deliberated a number of proposals to reduce the non-development budget, create fiscal space for pro-poor initiatives, fiscal consolidation through sharing of tax burden on equitable basis and strengthening fiscal devolution in the provinces, sources explained.