The nightmare for real estate industry continues as FBR reverts its stance to tax developers and builders under relax final tax regime. Applicable from tax year 2018, all developers and builders that were eligible under section 7C and 7D (final tax regime) and did not available the said scheme shall now be taxed under previous “normal tax regime” which is significantly higher.
This brings us back to square one: A serious question mark arises on the policy makers with the withdrawal of section 7C & 7D. Polices scoping real estate development should be designed keeping in mind a time window of at least 10 to 20 years. Any decent size real estate development project takes years to complete and are planned based on long term strategy where taxation plays an imperative role. These sections were added only 12 months back and were designed to broaden the tax net around real estate developers & builders. Perhaps the so called policy was not well thought out and was produced in desperation to meet annual revenue targets. This has little or no results for either party, as FBR was not getting the desired Billions that it anticipated from this so called policy, and real estate market was kept on hold for months on end. Even after reaching a not so desirable agreement, the industry started to abide by the new laws & regulations gradually. However the U turn by FBR has started to create distrust and nervousness between FBR and real estate industry.
Can FBR regain credibility and trust in future among the stakeholders of one of the most significant industry of Pakistan? With these drastic and poor planned policies, it is hard to envision that any new revenues will inflow in the hands of FBR through these steps. The solution for FBR is to create long term policy in the best interest of Pakistan where there is a “win win” situation for all the stakeholders, while extracting only a fair share of taxation and winning the trust of taxpayers through proper accountability and transparency.
(Article by Ubaidullah Javed, CEO)
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