Islamabad, April 10: The federal government is intensifying efforts to curb tax evasion in Pakistan’s real estate sector, Parliamentary Secretary for Finance and Revenue Saad Waseem Sheikh announced during a National Assembly session on Wednesday. While property taxes remain under provincial jurisdiction, Sheikh highlighted federal initiatives to address loopholes and improve compliance.
Federal vs Provincial Tax Responsibilities
Sheikh clarified that property tax administration falls to provincial governments. However, the federal government has introduced reforms under the Income Tax Ordinance, 2001, to tackle evasion in real estate transactions. These measures aim to ensure transparency and revenue generation at the national level.
Key Provisions in the Income Tax Ordinance
The Income Tax Ordinance includes specific sections to regulate property-related taxes. Sections 236C and 236K mandate advance tax collection during property trading. These provisions target income from property sales, capital value taxes on immovable assets, and advance levies on transactions. Sheikh emphasized that the advance tax system ensures consistent revenue collection from high-value real estate deals.
IMF Revenue Shortfall Clarification
Responding to concerns about an International Monetary Fund (IMF) report citing a Rs. 490 billion revenue shortfall for fiscal year 2024-25, Sheikh dismissed the claim. He explained that revenue targets are based on a tax-to-GDP ratio of 10.6%, adjusted according to nominal GDP growth. Lower inflation rates prompted a downward revision of the nominal revenue target, but the tax-to-GDP ratio remains unchanged.
Read more: PM Shehbaz Postpones New Real Estate Tax Package
Government Commitment to Revenue Goals
Despite economic challenges, Sheikh reaffirmed the government’s commitment to meeting original revenue targets. Efforts include expanding the tax base, improving compliance, and strengthening enforcement mechanisms. These steps aim to counterbalance lower inflation forecasts and stabilize fiscal performance.
Sheikh acknowledged ongoing issues with property tax evasion, including underreporting and fraudulent transactions. The federal government is collaborating with provincial authorities to streamline tax policies and enhance oversight. Future plans include integrating provincial land records with federal databases to automate tax assessments and reduce manual errors.
