Government urged to defer revision of property valuations

The government has been urged to defer revision of property valuations for the purpose of tax in budget 2017-18, arguing that "market is still trying to come to terms with previous revisions". Sources said Pakistan's real estate sector has submitted proposals to the National Assembly's Standing Committee on Finance for budget 2017-18 in which the sector proposed that "valuations should not be revised further in budget 2017-2018 and next revision should be done in the budget 2018-2019".
The real estate sector stated that the government has taken a bold step in the previous budget and attempted to increase property valuations significantly. This was a very drastic step for the real estate sector and the market participants are still in the process of adopting the new valuation system.
While drawing the attention towards certain valuation anomalies in some specific areas, it was stated that a sub-committee was constituted by the Finance committee to look into the matter and present its findings. After a series of meetings with the stakeholders of the area along with the representatives of Federal Board of Revenue (FBR), the sub-committee presented its findings and recommendations whose implementation is awaited.
The sector also proposed that property purchaser should be allowed to register at higher values (compared to FBR values) and pay 3 percent up to those higher values to avail the scheme. The upper limit of FBR value for the purpose of tax under 236W should be removed.
The benefits of the proposal would be: (i) accurate market values will be documented all over Pakistan gradually (ii) greater tax revenue collection on account of section 236K (withholding tax for property purchaser) and section 236C (withholding tax for property seller) of the Income Tax Ordinance (iii) investors will feel encouraged to use banking channels for transactions up to market values; currently there is reliance on cash transactions for payments beyond FBR values.
The sector suggested that instead of calculating the 3 percent tax on the differential "FBR value minus provincial registered value", it should be calculated on the full FBR value. Since the introduction of section 236W, the sector maintained that there is confusion in the market because of statement of different sale prices in various agreements. To avail the amnesty under section 236W, a buyer is required by the registering authority to register the sale deed and sale agreement at old Deputy Commissioner (DC) values. Otherwise they cannot avail the scheme.
On the other hand, the seller of property is required the sale agreement to be done at FBR values so as to ensure that he is getting documented money up to FBR values. This contradiction in agreements results in disputes at the time of property transfer and the government is proposed that the 3% under section 236W is simply charged on the full FBR value.
The Real Estate Investment Forum also suggested that tax rates should be reduced to encourage filers as this would spark a greater interest in the real estate sector because in the previous fiscal year the tax rates applicable under section 236C and 236K were increased 100% along with a significant increase in valuations of properties.