The Pakistani government, in collaboration with the International Monetary Fund (IMF), is exploring ways to increase tax revenue. One proposed measure involves raising the advance tax on property purchases for non-filers of income tax returns.
Key Points:
- Higher Withholding Tax for Non-Filers: Under the proposed plan, non-filers purchasing property would face a higher withholding tax compared to tax-filing individuals.
- Potential Revenue Boost: The FBR estimates this move could generate over Rs. 100 billion (approx. $500 million USD) in additional revenue for the next fiscal year.
- Discouraging Non-Compliance: The increased tax aims to incentivize individuals to file their income taxes and contribute to the formal economy.
- Real Estate Sector Focus: This policy targets the real estate sector, which is often seen as having a high concentration of non-filers.
Proposed Tax Rates:
| Property Value | Tax Rate for Filers | Tax Rate for Non-Filers |
|---|---|---|
| Up to Rs. 50 Million | 3% | 6-7% |
| Between Rs. 50-100 Million | 4% | 12% |
| Over Rs. 100 Million | 5% | 15% |
Context:
- Pakistan is currently seeking additional loans from the IMF.
- The IMF is urging the government to broaden the tax base by exploring untapped revenue streams.
- This proposal aligns with the IMF’s recommendations for structural reforms, including stricter measures for non-filers.
Current Scenario:
- Currently, a 3% tax is levied on property purchases by filers, while non-filers face a 10.5% levy.
- The government aims to increase the tax burden for non-filers to discourage tax evasion and generate additional revenue.
Looking Ahead:
The finalization and implementation of these proposed tax increases depend on approval from the Pakistani legislature. Whether this measure will be enacted and its ultimate impact on the real estate sector and tax compliance remain to be seen.
