Impact of real estate

The Federal Board of Revenue (FBR) is said to have created history by exceeding the upward revised target of Rs6,100 billion in 2021-22 fiscal. A major portion of the amount is collected through tax on property-related transactions. For the 2022-23 fiscal, the federal budget had raised the tax on property sale and purchase by nine per cent altogether. Previously, the tax rate on buyer, if non-filer, was 2pc, but now the tax rate has been raised to 7pc. Similarly, there was no tax on the seller of property after five years of ownership. Under the revised rates, every seller irrespective of timeframe has to pay a property tax of 4pc. The positive thing is that these tax rates are significantly reduced for income tax filers. For income tax filers, the tax rate is 2pc for both the buyers and the sellers, which is a substantial relief. The scenario suggests that the government is urging the public to become filer. However, there is a general perception that the revenue will reduce significantly as the property sale and purchase has already shifted to a reverse gear. Also, the property dealer association carried strikes throughout the country against the hike in taxes.

The problem basically is lack of awareness. The public is afraid of being income tax filers. They consider it a trap. The government needs a comprehensive awareness policy for public about the rules and regulations of income tax returns that will eventually increase the number of filers.

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The government has to assure the public that it is neither a trap nor a strenuous exercise to be an income tax filer. Unless the level of general awareness among public is raised, the revenue is not likely to enhance. In fact, a shortfall in overall revenue may occur. The government should carry a statistical analysis from the date of tax enhancement till date so that a comparison of revenue collection could be made, and due steps taken accordingly.

ABDUL BASIT

CHAKWAL

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