FBR lacks standardized asset valuation mechanism: FTO

A view of apartment buildings in Karachi.  - Reuters/File
A view of apartment buildings in Karachi. – Reuters/File
  • The report highlights the inability of the FBR to generate adequate revenue.
  • Significant discrepancies, inconsistencies, inconsistencies were found.
  • FBR says FTO had no jurisdiction over immovable properties.

ISLAMABAD: The Federal Tax Ombudsman (FTO) has revealed the failure of the Federal Board of Revenue (FBR) to formulate a standardized property valuation mechanism that is aligned with fair market value, especially in major urban cities where properties are valued at trillions of rupees. is, has been reported news.

This FTO report highlights the inability of the FBR to generate adequate revenue in this important sector. Furthermore, the FTO findings also noted that the Real Estate Directorate General (IMP) was formed through a law approved by Parliament in 2018, with a specific mandate to harness the potential of the real estate sector , but the office remained non-operational.

After a comprehensive review of DC rates, various valuations issued by the FBR, SROs and market analysis conducted by the research wing of the FTC, the FTO initiated an independent investigation under Section 9(1) of the FTC Ordinance, 2000.

The Research Wing found significant discrepancies, inconsistencies, weaknesses and inconsistencies in the valuation table of fixed assets in SRO 1734(1)12022 dated September 13, 2022. In response, FBR raised objections regarding the jurisdiction of this office and said that the office of FTO had no jurisdiction on this matter.

The FTO found glaring discrepancies in the assessment rates of fair market value set by the FBR in the case of Rawalpindi and observed that SRO 1734(1)12022 dated 13 September 2022 for Rawalpindi district, when compared with neighboring ICT Islamabad, Surprisingly little is seen. Unbalanced and incomplete.

For example, the heart of Rawalpindi city like Raja Bazaar, Asghar Mall, Sadiqabad, Peerwadhai along with other nearby residential and commercial areas have remained untouched. Most of the residential and commercial places of Rawalpindi Cantt are also missing like Naseer Abad, Khayaban-e-Sar Syed, Murgah, etc.

The omissions are clearly visible in the assessment rates of agricultural land and Rawalpindi District Rural. Takshila tehsil is completely missing. Valuation of built up/built up area is completely missing. Other tehsils of District Rawalpindi have been marginally affected, especially Murree where revenue will be collected on detailed and assessment basis. Statutory Regulatory Orders (SROs) are completely riddled with vague and paranoid entries.

Valuation of shops in commercial plazas is completely different from valuation of plots. The SRO completely ignored the assessment of shops located in various shopping malls of Rawalpindi tehsil. When determining valuations for Askari I to XV, it has been completely ignored that the main features of Askari are apartments. Apartment valuation is a completely different section, which has not been touched upon.

The real estate sector has witnessed a recent boom since July 2019 as a result of the tax exemption (Section 100D of the Income Tax Ordinance) given to the sector.

Rawalpindi is host to a large number of approved (by Rawalpindi Development Authority) unapproved/unregulated housing societies/schemes/projects. Among them, some well-known builders and developers have launched various projects and the starting prices offered by the sponsors/owners are available in the public domain i.e. on various websites of marketing companies.

A perusal of SRO 1734 reveals that the FBR authorities have not bothered to check the publicly available market rates in the said schemes/projects while issuing the SRO. The FTO has observed that no such effort has been made by the FBR nor has the filed constitution evolved any method which can be followed by the appraisal committees within their jurisdiction.

Further, no standing discrepancy committee has been constituted at any level to address the concerns of stakeholders in case discrepancies are found or incorrect assessments are made by the committees. Further, the concerned Directorate General of Real Estate could not add any value as it remained non-functional.

These lapses led to lack of uniform method of assessment, resulting in inconsistency, unfair assessment, under-assessment/over-assessment and arbitrary exercise of powers.

All these omissions constitute maladministration in terms of Section 2(3)(i)(b) and (ii) of the FTC Ordinance, 2000. Therefore, corrective measures are required by FBR in the next revised assessment table.

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