Daily Times

The National Assembly has approved the controversial bill concerning the realty sector by allowing buyers to clean up their huge undeclared transaction amount. The amendment to the income tax law has been approved by the lower house amid boycott of the session by opposition parties. The bill removes a gap between the basic rates at which most of the registries are signed at the deputy commissioner’s office and the valuation by the Federal Board of Revenue (FBR) determining the price of the property. The bill approved by the assembly states that the formula for computing the amount is ‘A-B’, where ‘A’ is the value of the immovable property determined by the evaluators of the FBR, and ‘B’ is the value recorded by the authority registering or attesting the transfer, which is the deputy commissioner’s office. However, this formula will be applicable only if the value A is higher. The buyer of the property will have to pay three percent of the difference between the A and B, and the FBR will not ask about the source of their income.

Despite the claims of Qaiser Ahmed Sheikh, Chairman of the National Assembly’s Standing Committee on Finance, that the bill is acceptable to all stakeholders, the bill has received severe criticism from the tax authorities, opposition parties, and even from the members of treasury benches. “Under the scheme those worried about disclosing their source of income will be exempted from this query after they pay the three percent tax on the differential,” Mr Sheikh said following the passage of the bill. The development has come despite opposition by the FBR and other PML-N MNAs who feared that such an offer would lead to money laundering, an aspect of which the reforms were launched to remedy in the first place.

The realty market had come to a virtual halt following the implementation of hefty taxes by the government in the budget 2016-17. Market operators had been asking the government to withdraw the taxes and had also threatened street agitation in this regard. Now that the matter has been decided upon by the National Assembly Standing Committee, the government should learn from this experience and draft appropriate policies so that such hurdles are not faced in the future. All the stakeholders must be taken onboard before any policy changes.

Although the current taxation regime was initiated to curb money laundering and to document the black economy, the plan failed to achieve its original goals, and the authorities had to give in to the demands of the sector. The scheme offered to the businessmen had also met the same fate earlier this year, in which the government failed to increase tax base miserably. Since coming to power in 2013, the government has taken most of the decisions through presidential ordinances and the legislative process in parliament have remained to a minimum. The absence of opposition for the major part of the current government’s tenure has also helped the government to pass bills through the House with relative ease. Although the government has a majority in the lower house of the parliament, it does not enjoy the same in the Senate. This is where the opposition can come together for proper vetting of legislation. The institution of parliament should be strengthened to keep a check on other institutions and to avoid the dominance of any group. *