Pakistan Targets Non-Filers with Higher Property Tax in Upcoming Budget

Pakistan Targets Non-Filers with Higher Property Tax in Upcoming Budget

The Pakistani government is tightening its grip on tax evaders, particularly those who haven’t filed income tax returns (non-filers). In a bid to boost revenue and encourage tax compliance, the upcoming budget is expected to increase the advance tax on property purchases made by non-filers.

This move comes as part of a new understanding between the Federal Board of Revenue (FBR) and the International Monetary Fund (IMF). An increase in withholding tax on property transactions specifically targets non-filers in the real estate sector.

Expected Impact and Revenue Generation

Following approval by the legislature, the FBR estimates this new tax measure could generate over Rs. 100 billion in additional revenue during the next fiscal year. The primary objective is twofold: discourage non-compliance and significantly increase tax collection from the real estate market.

The proposed tax structure outlines a tiered system based on property value. Here’s a breakdown of the potential tax rates for filers and non-filers:

• Property Value:
  • Up to Rs. 50 million
  • Between Rs. 50-100 million
  • Over Rs. 100 million
• Tax Rate (Filers):
  • 3%
  • 4%
  • 5%
• Tax Rate (Non-Filers):
  • 6-7%
  • 12%
  • 15%

IMF’s Push for Tax Base Expansion

Pakistan’s pursuit of fresh loans from the IMF has led to a push for broadening the tax base. The IMF recommends tapping into previously unexplored segments, such as non-filers, to achieve this objective. The government has also pledged to implement additional structural reforms, including blocking mobile SIM cards for non-filers.

Current Scenario and Expected Changes

Currently, tax authorities impose a flat 3% levy on property purchases for filers and a 10.5% tax for non-filers. This system is expected to be replaced with the tiered structure mentioned above, aiming to generate an additional Rs. 20 billion in revenue compared to the current fiscal year.

This new tax measure on property transactions signifies the government’s commitment to tackling tax evasion and increasing revenue collection. The impact on the real estate sector remains to be seen, but it is likely to incentivize property buyers to file tax returns and contribute to the national exchequer.

Source: https://pakobserver.net/non-filers-to-face-additional-withholding-tax-on-property-transactions-in-upcoming-budget/

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