Islamabad, Feb 1: As the government works to reduce taxes in the real estate sector, the Pakistan Business Council (PBC) has raised concerns about the potential consequences of these changes. In a recent letter to Prime Minister Shehbaz Sharif, the PBC emphasized that while the government’s efforts to stabilize the economy are commendable, tax reforms in the real estate sector should be approached with caution.
The PBC cautioned against providing further incentives to the real estate sector, which has been a significant source of black money in Pakistan.
The PBC’s letter comes in response to discussions with the Federal Board of Revenue (FBR), where Chairman Rashid Langrial suggested that lowering taxes on real estate transactions, especially undeveloped land, could boost business in the sector.
Read More:
Petrol Prices in Pakistan: February 2025 Update
However, the PBC argues that such measures could inadvertently encourage more black money to circulate and create an uneven playing field between the formal and informal sectors.
The council stressed the importance of continuing efforts to unearth black money and promote a transparent, level playing field in the economy.
In addition to these concerns, the PBC acknowledged the importance of supporting the construction business, which is seen as a formal sector contributing significantly to the country’s housing needs. However, it emphasized that any tax policy changes must be carefully crafted to avoid exacerbating Pakistan’s ongoing economic challenges.
The PBC also took issue with some of the proposals being considered by the government, including reducing withholding taxes on real estate transactions, abolishing the 3% federal excise duty (FED) on plots and homes, and exempting properties valued under Rs10 million from disclosing the source of funds.
While these measures are intended to ease the tax burden on the real estate sector, the PBC warned that such steps could undermine efforts to stabilize the economy and address underlying issues in the sector.
The council also expressed concerns about the potential negative impact of increased energy costs on industrial growth and exports. It highlighted the government’s recent decision to raise gas prices for captive power plants, which are essential for in-house energy generation in industries.
This move, the PBC argued, could hinder the achievement of the Prime Minister’s ambitious goal of increasing exports to $60 billion within three years.
The PBC further called for a more strategic approach to economic growth, focusing on exports, indigenization, and formalizing the business sector.
The council recommended a comprehensive review of the China-Pakistan Free Trade Agreement (CPFTA), which it believes disproportionately benefits China. It also advocated for increasing the tax-to-GDP ratio through more inclusive tax policies that target untaxed or under-taxed sectors, rather than overburdening the already taxed formal sectors.
Finally, the PBC reiterated its opposition to indefinite tariff protection for sectors where Pakistan lacks a competitive advantage, arguing that this policy stifles efficiency and innovation. Instead, it suggested providing targeted protection to sectors reliant on indigenous inputs, which face significant challenges due to Pakistan’s high business costs and infrastructure shortcomings.