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Rashid Langrial, Chairman of the Federal Board of Revenue (FBR), disclosed an eye-opening fact during a National Assembly subcommittee meeting only twelve Pakistanis reported assets exceeding Rs10 billion in their 2017 tax returns.
This revelation came to light in a session presided over by PML-N lawmaker Bilal Azhar Kayani, which focused on proposed limitations to real estate transactions for individuals with unverifiable income sources.
Langrial said, “Only 12 individuals declaring assets over Rs10 billion does not reflect the true wealth of Pakistanis.” He stressed the need of associating financial dealings with individual wealth. He made a comparison to India, where Mukesh Ambani is worth $119.5 billion, and over 100 individuals have fortunes exceeding $3.3 billion.
Proposed Regulations to Combat Tax Avoidance
To combat tax avoidance and money laundering, the government has suggested new regulations that would make property purchasers provide documentation of their claimed assets to support their purchases. A person’s stated assets cannot exceed 30% of the value of any property they purchase under the new regulations. In order to promote voluntary disclosures, the FBR proposed removing the need to reconcile assets with a value of up to Rs 50 million.
Arif Habib, a well-known business leader, has raised concerns about the plan, saying it might interfere with property deals and put buyers at risk of being taken advantage of. “The draft bill is dangerous, especially at a time when businesses are already investing heavily in gold and dollars due to economic uncertainty,” said Habib.
Impact on Property Transactions
Last fiscal year, there were 1.7 million property sales, with a value of less than Rs10 million in 93.7% of them, according to FBR data. The proposed legislation would have an impact on 41,801 cases or 2.5% of transactions. While defending the program, Langrial said, “Our objective is to target only 2.5% households.”
Ashfaq Tola, the president of Tola Associates, warned against making big changes to the whole real estate industry just for a small number of deals. “If the FBR cannot manage 41,801 cases without disrupting the system, it raises serious concerns about its efficiency,” said Mr. Mueller.
Legislators have raised concerns about the possible abuse of power and have questioned the efficacy of current security measures, like the ability to block SIM cards and utility connections for non-compliance. Critics of the new regulations said they would lead to an increase in money laundering and real estate market instability.
In the first six months of the fiscal year, there were 735,000 property transactions, with half of those involving individuals who did not submit taxes, as was disclosed during the meeting. With a success rate of barely 3%, the FBR acknowledged that post-purchase audits have been mostly ineffectual.
Even Langrial admitted that there are difficulties, saying that many filers don’t report newly acquired assets. As a means of reviving the real estate market and encouraging compliance, he proposed pending government approval—a reduction in taxes on property transfers.
On Thursday, the subcommittee will likely meet once again to complete its recommendations. If a property acquisition is less than Rs10 million, the panel may suggest not having to justify the source. This is based on early conversations.
