EDITORIAL: Now that the government knows that a big part of the real estate sector is not complying with reporting requirements through the Designated Non-Financial Business and Professions (DNFBP) initiative, and housing societies and market pundits are said to be trading open files to the tune of Rs 1-10 million without paying a penny to the government, the obvious question begs itself that what is it doing about it? Especially since it has also become known that the main problem is under-staffing at the DNFBP directorate of the FBR (Federal Board of Revenue). This lapse could cost the country very dearly because regulating sectors like real estate and gems and jewelley through DNFBP is one of the key requirements of FATF (Financial Action Task Force) regulations that we've been bending over backwards to meet. Now who's to blame if market manipulators are leveraging a grey area in the rules to feed the black economy right under the nose of the authorities?
The problem has actually grown in magnitude as well as complexity because previously such business was restricted to property dealers and their clients but now well-known housing societies and developers have also joined in on the act. And despite all the hard work in meeting FATF directives so far only 22,000 of more than 500,000 property dealers and developers have been registered as DNFBPs. And just the fact that so many people feel so confident about bending and breaking the law about something so important goes to show how weak its implementation must be. That does not speak very highly of a government that goes out of its way to announce its commitment to justice, fair play, and all that, to say the least.
Surely, no more time must be lost in straightening out the real estate sector and limiting opportunities for black money to not just find safe haven, but also welcome opportunity to multiply without leaving anything at all for the official treasury. It's an outrage that housing companies can register with relevant authorities, blatantly indulge in open buying and selling of files, even charge fees on transactions and demand legally obtained affidavits, and still comfortably evade the tax net. And if shortage of staff in a certain department of the FBR is the chief reason for this travesty, then why hasn't anything been done about it?
It's ironic that on the one hand, the government makes such a big deal about the real estate and construction sectors, even allows suspect money into them under an amnesty scheme and waxes eloquent about how it has stimulated growth in forty or so associated sectors. Yet, on the other, it looks the other way as the sector is rattled with corruption and refuses to cough up legally binding tax money. This way the government itself leaves the FBR short of revenue that it would, rather should, have easily collected if only the law of the land applied equally to one and all. Getting real estate sector players including brokers, builders and developers registered as DNFBPs, for which FBR simplified reporting requirements to get 22,000 of them on board, was reportedly part of the last remaining obstacle in meeting the 27-point FATF action plan. Yet here we stand; well aware of the problem and who is causing it yet still unable to solve it.
Hopefully, the government has only shown only half of what it knows so far. And the bit about how it plans to handle this issue will become clear when it takes action - preferably sooner rather than later. Otherwise it will have to share the blame with everybody piling illegal profits through open sale and purchase of housing files in case there's another disappointment at the FATF.
Copyright Business Recorder, 2021