PBC opposes tax relief for real estate
ISLAMABAD: The Pakistan Business Council (PBC) advised Prime Minister Shehbaz Sharif on Friday not to help the realty sector, a key source of illicit money, while the government finalizes tax cuts.
The PBC wrote to the PM that despite acknowledging his government’s economic stabilization efforts, real estate tax regulations should not be changed. However, it promoted formal construction business facilitation, which is necessary to address the country’s housing needs.
The PBC reported that Rashid Langrial suggested decreasing real estate taxes to stimulate business in a meeting with the FBR chairman.
The FBR chairman stated that “undeveloped land, ie, trading in plots, was suffering from high transaction costs and the government was reviewing these”.
We remind you that most of the formal sector pays 18% GST. Thus, the PBC advised continuing to find illicit money in plots and leveling the playing field with the formal sector.
A day after a PBC delegation met the PM and welcomed economic stability, the letter was drafted. A third of direct taxes and 40% of exports come from our members.
PM Sharif’s housing sector task team and taxation committee have finalized real estate tax reduction suggestions.
Reduced withholding taxes for plot sellers and buyers are proposed. It is also proposed to eliminate the unfair 3% federal excise fee (FED) on plots and dwellings. Even on multi-sold homes, the FBR improperly charges 3% FED. The law restricts the charge to builder and developer first sales.
A plan exempts assets valued up to Rs10 million from revealing resource sources. About 94% of the 1.7 million property transactions reported with any government last year were valued at less than Rs10 million.
The PBC advised against prematurely sparking development before basic faults were addressed by reforms.
This week, IMF Resident Representative to Pakistan Mahir Binici advised Pakistan to be patient and stay on the path to economic stability.
The PBC noted that Pakistan has repeatedly relied on the IMF due to import-led demand imbalances in its external account. It stated that PBC members and other formal sector individuals have contributed disproportionately to meeting straining tax revenue expectations.
The manufacturers’ association also said the government’s recent 17% gas price increase for captive power plants, which generate power in-house, would make it harder to meet the PM’s three-year export goal of $60 billion.
“Impeding this ($60 billion) admirable objective is regionally uncompetitive energy cost, higher taxation and the cash flow burden from withholding taxes,” said it.
The recent gas price hike for captive plants would not assist, hence the council recommended benchmarking export incentives with regional competitors.
It requested a reworking of the Beijing-favored China-Pakistan Free Trade Agreement.
The PBC recommended increasing the tax-to-GDP ratio by stimulating business and investment growth through exports and indigenisation, formalisation, corporatisation, and listing of enterprises, and widening the tax base to include untaxed and under-taxed industries.
Increasing the tax-to-GDP ratio by taxing the already taxed, like the current budget, would discourage company growth, it noted.
Manufacturers also wanted the dividend income tax eliminated, which was double taxation.
The PBC has opposed unconditional and indefinite tariff protection for sectors where Pakistan has no comparative advantage, production facilities are outdated and inefficient, competitive scale is unlikely, and domestic consumers cannot receive value comparable to imports or exporters cannot receive input at a competitive cost.
The PBC concluded that given Pakistan’s weak infrastructure and high business costs, minimal protection for sectors that relied on indigenous inputs was justified.
It also highlighted exporters’ raw material imports after the budget imposed 18% sales tax on local goods.
Source:
https://tribune.com.pk/story/2525847/pbc-opposes-tax-relief-for-real-estate
