Levy of 'GAT' on properties: FBR informs RAC of legal hitch

The Federal Board of Revenue (FBR) has informed the Revenue Advisory Council (RAC) that the imposition of the Gross Asset Tax (GAT) on the immovable property would not be legally possible after the 18thAmendment. Sources told Business Recorder here on Friday that the issue of the imposition of the 'GAT' on all kinds of properties was discussed threadbare during the meeting of the RAC chaired by Dr Hafiz Pasha.
It is further learnt that the FBR has asked the RAC members to give alternate proposals in case the RAC is strongly opposing new taxation measures for 2011-12. The FBR has to generate additional revenue to meet revenue targets for next fiscal year and the RAC should give alternate proposals in case no new taxation measure is being taken in budget.
It was discussed that the government may face serious problems in the implementation of the 'GAT' on the immovable properties after 18th Amendment. The FBR has already transferred powers to collect the capital value tax on property to provinces. One of the options is that provinces may allow the FBR to collect the 'GAT', but what would be the situation in case any of the provinces does not allow the FBR to collect 'GAT' on immovable property on behalf of provinces? Therefore, it would not be legally possible to impose such kind of asset tax on the immovable property.
Some members of the RAC were also of the view that imposition of proposed Gross Asset Tax could be the violation of 18thAmendment as taxing assets is the right of the provinces and not of the federal government, sources said. Some members of the RAC have agreed in principle to recommend the federal government increase the corporate tax rate for banking and insurance companies above 35 percent in the budget 2011-12.
However, few members of the RAC supported the idea for reduction in corporate tax rate for other companies excluding banking and insurance companies from existing 35 percent to scale down further, sources added. The RAC also considered a proposal on reduction in import duty on old cars as proposed by the ministry of commerce whereas tax authorities opposed this proposal. It was decided that commerce and industries ministries be invited so as to take some decisions on this proposal.