Proposed amnesty scheme for real estate sector: FBR has not conducted any study on revenue impact

The Federal Board of Revenue (FBR) has not worked out the exact estimated figure to be generated from the proposed one-time amnesty scheme for real estate sector, which was recently approved by the National Assembly's Standing Committee on Finance.
Sources told Business Recorder here on Monday that the FBR has opposed both the proposals of real estate sector ie onetime exemption/waiver from explanation of sources of investment in immovable property and fixation of nominal tax rate for difference between the DC rates and the FBR notified rates. "FBR strongly opposed the scheme. Therefore, FBR has not conducted any detailed study on revenue impact from the proposed amnesty scheme," they remarked.
Referring to a guesstimate of Rs 7,000 billion invested in real estate sector annually, sources said if it is assumed that Rs 7,000 billion are invested, the tax may be worked out over Rs 200 billion per year on payment of 3 percent proposed tax. Another assumption is that if Rs 4,000 billion transactions took place in real estate sector, Rs 115-120 billion could be estimated at the rate of 3 percent proposed tax. But all these are guesstimate and FBR has not worked out the exact revenue impact of the amnesty scheme keeping in view serious reservations over the amnesty schemes as a government policy.
Various proposals were also put forth by the members in the 41st meeting of the Standing Committee of the National Assembly on Finance, Revenue, Economic Affairs, Statistic and Privatisation held on October 05, 2016 (05.10.2016). It was suggested that a one-time exemption/waiver for a specified period may be granted with respect to explanation of sources of investment made in immovable property. Another proposal was that the difference between the DC rates and the FBR notified rates in respect of immovable property be subjected to a nominal fixed tax rate. However, the FBR did not agree to these proposals.
The last meeting of the Finance Committee chaired by Qaiser Ahmad Sheikh, approved recommendations of the sub-committee that "FBR may charge 3 percent additional tax to the extent of amount they (people renegade real estate transactions) are unable to reconcile in their wealth statement and amnesty scheme must be only available for the people engaged in the real estate transactions. The areas where valuation has been done on higher side by the FBR may be rectified immediately with the consent of stakeholders."
The sub-committee also recommended that the "federal government may charge 1 percent in total for withholding tax, advance tax from both buyers and sellers and capital gain tax. Prevailing federal government taxes charged by the FBR on property transaction was approximately 3 percent to 6 percent and capital gain tax on FBR value or 1 percent of fair market value whichever is higher. This one percent will be inclusive of all advance/adjustable federal government taxes including capital gain tax," it added.