ISLAMABAD: A massive downward revision of CD rates in Islamabad Capital Territory (TIC) is estimated to result in potential revenue loss of Rs 30 billion for the public treasury, we learned .
Islamabad’s tax administration previously devalued real estate by 4.5 trillion rupees by lowering DC rates. All of this will be costly nationally. A senior RBF official admitted on Sunday that the devaluation of property was carried out before the 2021-22 budget and was intended to undermine the budgeting exercise for 2021-22, so the tax machine was now considering different options to block this. move forward in the next finance bill.
The World Bank (WB) has approved $ 400 million for Pakistan Raises Revenues (PRR) and a Disbursement Linked Indicators (DLI) is in the process of signing an agreement on property valuation methodology and valuation tables with the provinces. The WB document says extensive exemptions also apply to property taxes and income is also lost due to low valuations used for tax purposes. The capital gains tax (CGT) brings in negligible revenue due to the zero rate applied to capital gains on the sale of real estate after four years of ownership, and a rate of 5 to 10% for sales after one to four years of detention.
Documents submitted with the RBF, a copy of which is available with The News, suggested that the tax administration take the ICT package as part of the RBF assessment mechanism or integrate areas of ICT into its estate located along four main roads. The RBF to take control of the valuation of properties along the GT road in zones II and V, all villages as well as the Islamabad road from Faizabad to Rawat, all villages along the Murree road in ICTs and all the villages along the Lethrar and Nilore roads. The RBF is expected to issue a new appraisal of the property in those respective areas after conducting a spot investigation and proper professional work, the newspapers said.
Previously, the RBF had left some areas of ICT to the local government to set DC rates and the Revenue Administration of ICT had undertaken a downward revision on the recommendation of Patwaris but without doing the research work to determine the market value of the property. The ICT administration went ahead with the DC rate downgrade for different jurisdictions by issuing a notification on April 29, 2021.
The documents indicated that such an exercise required surveys of markets / commercial and residential areas to assess the actual market value before notifying DC tariffs. Based on DC rates, the RBF collects withholding tax on the sale and purchase of goods, and another capital gains tax is charged. “It is estimated that with a downward revision of CD rates in some areas of ICT, RBF will face a potential revenue loss of Rs 30 billion,” senior official sources said.
The market price in the Jahengi area is around Rs 5 million per marla while in the Tarnol area the market price is Rs 4 million per marla with GT Road. However, the DC lowered the rates to 1.5 million rupees per marla for the Jahengi area and 1.2 million rupees per marla for Tarnol with GT Road. There have been glaring examples for Bokra and Notha villages as these lands are located behind an international brand on the Kashmir Highway (now Srinagar Highway). A particularly large devaluation was made for commercial areas and even for residential areas.
The assessment of property rates reported by the RBF was carried out under the PMLN-led regime, when former Minister of Finance Ishaq Dar served as Minister of Finance and Revenue. After having carried out tough negotiations, he had placed the valuation rates of the RBF in order to be closer to the market rates. In the first attempt, he notified the RBF of valuation rates close to 60% of the market rates at the time. Then the RBF valuation tables were adjusted but so far the reported rates of the RBF were not up to market rates.