Bringing developers, builders into tax net: FBR fails to achieve desired results

ISLAMABAD: The Federal Board of Revenue’s (FBR) exercise to bring developers and builders, especially new housing societies into the tax net has failed to achieve the desired results.

It is learnt that the FBR is expected to issue increased values of immovable properties from July 1, 2024. The FBR has started the process of the updation of valuation tables of properties across Pakistan in consultation with the provincial authorities.

Sources told Business Recorder that the FBR was required to fix the values of the new housing societies as well. The last valuation of immovable properties was done in March 2022. The new rates of immovable properties across the country have not been enhanced in the last over two years following the commitment of the FBR to bring new housing societies into the tax net.

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The FBR had temporarily suspended an increase proposed in the valuation of immovable properties till September 2023.

It was agreed between the FBR and the real estate sector that the FBR for the time being will not issue enhanced values of immovable properties in August 2023.

The committees were constituted in each city to work out the new values in consultation with the respective associations of the real estate sector. Later, developers and builders coordinated with the regional tax offices and finalised their values. The agreed rates were communicated to the FBR. However, there is no further development on this account.

It is expected that the new rates of the immovable properties will be notified in June 2024 for their applicability from July 1, 2024.

The Federal Tax Ombudsman (FTO) had directed the FBR that the housing schemes in posh areas must be valued on real-time basis to implement accurate valuation tables of immovable properties.

The FBR had received directions from the FTO that the valuation table must include the cost of the built-up structure. The housing schemes in posh areas may be valued on a real-time basis.

Certain residential schemes announced by real estate developers have not been included in the valuation table.

The FTO office found that a lack of uniform standards resulted in inconsistencies and anomalies in determining fair market value. Three main approaches should have been used while determining fair market value namely, cost-based approach, comparison approach and income capitalisation approach.

Since no SOP was available, therefore, the FBR authorities were advised to take guidance from International Valuation Standards (IVS) formulated by the International Valuation Standards Council (IVSC) which are generally accepted across the globe as follows: Valuation Standards should be principles-based and adequately address nature of the immovable property. Standards are to be created and revised, when necessary, by way of a transparent process after appropriate exposure.

Besides, valuers must follow principles of integrity, objectivity, impartiality, confidentiality, competence and professionalism while determining valuation of properties, the FTO report maintained.

In addition, valuers must have the technical skills and knowledge required to appropriately complete the valuation assignment.

Copyright Business Recorder, 2024