Property valuation: Revision in DC rates in ICT to cost public kitty Rs30 billion

ISLAMABAD: A massive downward revision in DC rates in the Islamabad Capital Territory (ICT) is estimated to cause a potential revenue loss of Rs30 billion to the national exchequer, it was learnt.

The Islamabad Revenue Administration had earlier devalued real estate by Rs4.5 trillion by revising downward DC rates. All this will cost a lot to the national exchequer. One top official of the FBR on Sunday conceded that the devaluation of property was done ahead of budget 2021-22 and was aimed at undermining the budget-making exercise for 2021-22, so the tax machinery was now contemplating upon different options to block this move through the upcoming Finance Bill.

The World Bank (WB) approved $400 million for Pakistan Raises Revenues (PRR) and one Disbursement Linked Indicators (DLI) is signing an agreement on methodology for property valuation and on valuation tables with the provinces. The WB document states that extensive exemptions also apply to property taxes and revenue is also lost due to the low valuations used for taxation purposes. The capital gains tax (CGT) returns negligible receipts because of the zero-rate applied to capital gains from the sale of immovable property after four years of ownership, and rates of 5-10 percent for sales after one to four years of ownership.

Documents submitted with the FBR, a copy of which is available with The News, have suggested the revenue body to take the whole ICT under the FBR evaluation mechanism or take areas of ICT into its domain located along four major roads. The FBR must take control of property evaluation along the GT Road in Zone-II and Zone-V, all villages along with Islamabad Highway from Faizabad up to Rawat, all villages along the Murree Road in ICT and all villages along Lethrar and Nilore Road. The FBR should issue fresh evaluation of property in these respective areas after conducting spot survey and proper professional working, the papers said.

Earlier, the FBR had left certain areas of the ICT for the local administration to fix the DC rates and the Revenue Administration of ICT had undertaken downward revision on the recommendation of Patwaris but without doing the spadework for ascertaining the market value of the property. The ICT administration moved ahead with downward revision in DC rates for different jurisdictions by issuing a notification on April 29, 2021.

The documents said that such an exercise required surveys of markets/ commercial and residential areas to assess the actual market value before notifying the DC rates. On the basis of DC rates, the FBR collects withholding tax on the sale and purchase of property, and another Capital Gain Tax is charged. “It is estimated that with downward revision in DC rates in certain areas of ICT, the FBR is going to face potential revenue loss of Rs30 billion,” said top official sources.

The market price in Jahengi area is approximately Rs5 million per marla while in Tarnol area, the market price stands at Rs4 million per marla along with G.T Road. However, the DC revised downward rates to Rs1.5 million per marla for Jahengi area and Rs1.2 million per marla for Tarnol along with G T Road. There have been some glaring examples for villages Bokra and Notha as these lands are located behind one international brand on Kashmir Highway (now Srinagar Highway). Especially huge devaluation was done for commercial areas and even for residential areas.

The valuation of property rates notified by the FBR was done during PMLN-led regime when former finance minister Ishaq Dar was holding the charge of minister for finance and revenues. After holding tough negotiations, he had placed the FBR valuation rates in order to go close to market rates. In the first attempt, he had notified the FBR valuation rates close to 60 percent of market rates at that time. Then the FBR valuation tables were adjusted but so far, the FBR notified rates were not up to the market rates.