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Supreme Court is requested to ban amnesty scheme

Supreme Court is requested to ban amnesty scheme
Government imposes Income Tax Act 2016 (06-12-2016)

The Federal government has imposed the Income Tax (Amendment) Act 2016 across the country. Parliament approved tax amnesty scheme for real estate sector on 30th of November 2016. This is open ended amnesty scheme, without time limit. According to this scheme non-filers or people with black money will be able to become filer after paying 3% tax.

Motives of government to give property tax amnesty scheme

The government has the following motives to offer amnesty scheme for real estate sector. Firstly, government wants to bring shadow economy to regular economy. Pakistani shadow economy is 20% of the real economy. Secondly, government wants to bring more people to tax net. Thirdly, government wants to cool down realtors who were protesting down to record low property transactions. Fourthly, government wants to boost the construction sector that was hit hard due to new taxes.

Letter of Transparency International Pakistan to Supreme Court to ban real estate tax amnesty scheme (05-12-2016)

Transparency International Pakistan has written letter to the Supreme Court of Pakistan to ban tax amnesty scheme for real estate sector. Transparency International Pakistan has also requested to ban all future amnesty schemes. Here are the major objections of Transparency International Pakistan:

Property tax Amnesty scheme will destroy the tax system in Pakistan:

Pakistan is moving in the right direction to establish proper tax collection system. This amnesty scheme will eradicate the tax system in Pakistan.

Property tax Amnesty scheme will promote more corruption:

Amnesty scheme will encourage the people to earn money through illegal means as they know that they can get their assets clean by paying just 3% tax.

Tax payers will be discouraged due to property tax amnesty scheme:

Honest tax payers who pay up to 35% taxes on their income will be discouraged due to this tax amnesty scheme.

Recommended:
Pakistan property tax 2016

(23) Comments

    • YOUSUF LODHI

      TODAY I CALLED FBR LEGAL TEAM

      ACCORDING TO THEM

      THERE IS NO TIME DURATION IN THIS SCHEME

      AMNESTY SCHEME IS APPLICABLE TO ALL TRANSACTIONS (BEFORE & AFTER 1 JULY 2016)
      ACCORDING TO THE GUY MUCH WILL BE CLEAR AND MADE EASY IN THE NEXT BUDGET 2017

      SO, CONFUSION WILL PREVAIL

      IMPORTANT POINTS
      1- NO TIME LIMIT SO OPEN ENDED AMNESTY SCHEME
      2- REAL TRANSACTION VALUE WILL BE ALSO BE SCRUTINIZED BY FBR
      3- ADVANCE TAX / WHT OF 3% TO BE PAID BY BUYER NON-FILER TO BE FILER OR TO WHITEN BLACK MONEY @ THE DIFFERENCE OF FBR RATE & DC RATES. THIS TAX WILL BE PAID AS REGISTRY FEE.

      PROEPRTY MARKET AFTER AMNESTY SCHEME

      TOTAL CONFUSION IN REALITY SECTOR
      NO SALE AND PURCHASE ACTIVITY
      MARKET IS TOTALLY STAGNANT ON GENUINE BUYERS ARE BUYING PROPERTIES

      BUT

      STOCKS BEFORE AMNESTY ON 29TH NOVEMBER 2016 = 42300
      TODAY = 45300

      IT LOOKS LIKE THAT THIS AMNESTY SCHEME IS FRIENDLY NOT FOR PROPERTY SECTOR BUT FOR STOCKS. STRANGE BUT TRUE

      Reply
  1. YOUSUF LODHI

    on   said 

    GHAR47

    http://download1.fbr.gov.pk/Docs/20161281612549834CircularNo18OF2016(IncomeTax).pdf

    PLEASE READ THE LINK ABOVE WHICH I HAVE TAKEN FROM FBR OFFICIAL WEBSITE. (AN SRO ON AMENDMENT i.e. AMNESTY SCHEME)

    IT DOES NOT INDICATE THAT THE AMNESTY SCHEME IS RESTRICTED TO PROPERTIES PURCHASED BEFORE 01 JULY 2016 AS DAILY DAWN STATED IN THEIR ARTICLE DATED 07 DECEMBER 2016

    RATHER IT IS INTERPRETED THAT IT IS APPLICABLE TO ALL PROPERTIES BEFORE AND AFTER 01 JULY 2016

    CAN YOU KINDLY COMMENT ON THIS OFFICIAL VERDICT OF FBR ???

    Reply
    • rizwan

      on   said 

      DEAR YOUSAF BHAI THERE IS NO CLARIFICATION OF FBR REGARDING OF WHTHER IT WILL BE APPLIED BEFORE 1 JULY TRANSACTIONS OR WILL IT BE AVAILABLE FOR AFTER 1 JULY TRANSACTIONS ALSO IN THE SRO…GHAR47 PLZ CLEAR….ANY BROKER OR DEALER CAN CLEAR IF ANYONE HAS USED THIS AMNESTY SCHEME??

      Reply
    • Rizwan
      Yes amnesty scheme is for people who bought properties before 1 July 2016

      RESULTS
      NO INVESTOR WILL INVEST IN PROPERTY SECTOR NOW
      ONLY GENUINE BUYERS
      PRICES WILL FALL IN LONG RUN

      Reply
  2. YOUSUF LODHI

    on   said 

    IT CLEARLY INDICATES THAT THIS AMNESTY SCHEME IS ONLY FOR THOSE PROPERTIES WHICH ARE REGISTERED AT OLD DC RATE APPLICABLE AND ENFORCED BEFORE 01 JULY 2016…. AND…. ARE NOT REGISTERED AT FBR NOTIFIED VALUE EFFECTIVE JULY 2016

    GHAR47
    DO YOU AGREE WITH MY MY POINT OF VIEW THAT THE AMNESTRY SCHEME IS MEANT TO BE FOR PROPERTIES REGISTERED AT DC RATE AND SOLD OR PURCHASED BEFORE 01 JULY 2016 ????

    PLEASE GET IT VERIFIED FROM SOME RELEVANT AND RELIABLE SOURCES AND THEN CONFIRM TO YOUR READERS IN FULL, FAIR AND AUTHENTICATED WORDS. THANKS FOR YOUR COOPERATION
    ======================================================

    GHAR47

    I had posted to you my above said content few days ago. In response, you stated that the amnesty scheme is for all purchasers: before and after 01 July 2016

    Now it is confirmed that the amnesty scheme is restricted to purchaser before 01 July 2016. You should pat on my back that my understanding was right.

    It means that any one (particularly non-filer) purchasing property right now….will have to prove source of income ???? failing which he/she(particularly non-filer) will be taxed @ 35% of the entire FBR value as amnesty scheme is not available/applicable to him/her

    Please comment

    Reply
    • YOUSUF LODHI
      There are many mix reports
      BUT
      DAWN has also mentioned that this amnesty scheme is for buyers who bought properties before 1 JULY 2016.
      YES
      You have rightly predicted the amnesty scheme

      ONE THING YOU HAVE MENTIONED IS LIKE NIGHTMARE FOR BUYERS / INVESTORS WITH BLACK MONEY / IT WILL TOTALLY STOP INVESTMENT IN REALITY SECTOR
      NOW after 1 JULY 2016 PURCHASE, BUYERS WILL PAY HEAVY FINES LIKE 35%

      THIS WILL PROVE DEATH BLOW TO ABNORMALLY HIGH PROPERTY PRICES

      WHY SMALL / CHEAP PROPERTY MARKET IS STRONG
      WHY BAHRIA TOWN KARACHI THAT WAS IN LOSS IN 2016 IS PICKING UP NOW?
      BTK HAS LOW PRICES AND STRONG BUY. EVEN GENUINE PEOPLE CAN BUY IT

      ONE INTERESTING FACT
      STOCKS ON 29TH NOV 2016 = 42000 (1 DAY BEFORE AMNESTY SCHEME BILL WAS PASSED BY PARLIAMENT)
      SROCKS TODAY = 44300

      SO WHY STOCK ARE NOT FALLING BUT RISING?
      PEOPLE WITH BLACK MONEY KNOW THE TRAP
      SO THIS AMNESTY SCHEME BY GOVERNMENT WAS

      1- TO SKIM MORE TAXES FROM RE SECTOR
      2- TO COOL DOWN REALTORS WHO WILL NEVER PROTEST AGAIN

      LONG TERM PROJECTION

      FBR WANTS GOVERNMENT TO END ALL CONFUSION BY NEXT BUDGET
      OR
      FBR RATE WILL BE THE MARKET VALUE OF PROPERTY / ALL TAXES ACCORDING TO MARKET RATES
      HOW IT WILL HAPPEN?
      PRICES ARE DOWN
      NOT MUCH DIFFERENCE BETWEEN MARKET VALUE FBR RATE

      Reply
    • RIZWAN

      on   said 

      YES YOUSAF BHAI EVEN IM ASKING THE SAME QUESTION BUT NOONE HAS BEEN ABLE TO ANSWR THIS WITH CREDIBLE SOURCES…GHAR47 PLZ FIND AN AUTHENTIC SOURCE TO CONFIRM THIS…

      Reply
  3. Hasan

    on   said 

    President Signs Act, Grants Legal Cover to Amnesty Scheme
    (Dawn Main Page, Wednesday, December 7, 2016)

    http://epaper.dawn.com/DetailNews.php?StoryText=07_12_2016_001_006

    By FBR estimates, there is PKR 4 trillion black / unaccounted for money parked in real estate. Let’s ignore for a moment other estimates that put this figure to over PKR 7 trillion.

    With this amnesty scheme they expect to collect PKR 40 – 50 billion if people pay 3% to whiten money.

    Even if excessively conservative calculations are made: i.e. take lower figure for money parked in real estate and higher figure for expected revenue from the 3%, then that means about 1.25% of the (black) money-mass in property is going to be touched by this scheme.

    A mere 1.25% ….that too with conservative numbers!

    In all likelihood, it’s not even going to punch 0.5% of property market. Bravo.

    And to benefit from it all, the corrupt are expected to become dutiful tax filers. Special good luck with that.

    Withholding taxes stay in place.

    Next budget shall see FBR values raised further to eventually be in line with market values. Hence, taxes calculated on difference between archaic DC values and ever-increasing FBR values, shall increase even more. A further deterrent for property flipping for quick profits.

    Amnesty is only for transactions before July 1, 2016. Not going to help money laundering efforts given that new black money cannot easily enter the system. And old black money shall not be too eager-beaver to become tax filers.

    What I see is that slowly & gradually, noose is being tightened around black money. One way or the other, they are being squeezed & can’t operate freely. In fact, noose around Pakistan’s black property market is working better than in India with their demonetization efforts. Our bottleneck is the tax filing requirement to recover advance taxes or to avail amnesty. No corrupt big fish worth its salt is going to bite this bait. They simply cannot become tax filers. A few small time minnows might take it but that’s that. That being the case, property market has pretty much lost 80% of its steam that was dependent on black money.

    Such type of soft incentives for people to become tax filers or to document economy, are what could be termed as Pull Strategy. Does not work in third world countries as they are too much immersed in corruption and it becomes an addiction, a way of life. Societies do come out of it eventually (as we are, thankfully) but it has more to do with a form of Push Strategy …i.e. when force of law unleashes strict punitive action (jail, confiscation of property, heavy fines, etc) on money launderers, corrupt people hiding real incomes, etc. And starting with the big fish, then message filters down below. Then people start becoming filers.

    At the moment, Supreme Court need not bother about banning amnesty scheme. They could let it be and it’ll meet its natural demise. Don’t be surprised if FBR ends up with not even 10% of their expected PKR 40-50 billion, from this exercise in futility.

    Property market can forget about past glory for the time being. And most likely for several years.

    Reply
    • Hasan
      Stunning analysis

      Now comes the clarity
      First it looked like that it is for all transactions before and after 1 July
      But now its clear that amnesty scheme is for transactions before 1 July 2016

      This will prove blood bath for high property prices in long run

      Government will get taxes
      Investors will not invest in the sinking ship as according to many experts prices we saw in May 2016 will not be seen again till 2020
      By this amnesty scheme government has given exit to people who have parked money in real estate sector
      THIS IS WHY STOCKS ARE BOOMING @ 44300 TODAY

      PRICES
      DHA KARACHI 35% DOWN FROM PEAK BEFORE 1 JULY 2016
      DHA LAHORE 25% DOWN
      DHA ISLAMABAD 20% DOWN

      The best possibility is that property market will be stagnant for 3-4 years as it happened 2008-2012
      Genuine sale and purchase will continue
      Prices will start rising only when after 3-4 years purchasing power of people will increase.

      This amnesty scheme has left real estate agents and real estate stake holders without any option for future. When this scheme will fail realtors will not protest again.

      YES, FBR will bring its valuation rate more close to market value by next budget, which will be death blow in its own

      IN LONG RUN GENUINE BUYERS WILL GET BENFIT

      Reply
          • Hasan

            on   said 

            This tax filing thing is the main catch.

            Amnesties almost always do not work …whether rates are high (India has tried high rates) or low (Pakistan tried low rates with traders earlier this year and now with this 3% amnesty for real estate). They fail miserably because:

            Corrupt people do not like visibility …any type of visibility. They even hide this fact from close family members & neighbours.

            Corrupt people do not just indulge in only one transaction for which an amnesty can wash them clean. Dirty money becomes a habit. So future transactions (including non property ones too) could be risky if availing amnesty for one particular transaction brings them to FBR’s attention.

            Corrupt people specially do not trust the system that they’ll be let off by revealing themselves …or more importantly their sources of unlawful incomes.

            And here’s the punch line: whether paying 3% white washing charges in this real estate amnesty scheme would require them to become tax filers or not …..it would still not matter. Why?

            See, tax filing is a formal annual exercise. Of course, it brings one to FBR’s attention forever …which is fine if one only has white money.

            But even if the payer of 3% was not required to become a formal tax filer ….it’s still not going to help matters for him. Because, that small act of paying a fee is a kind of slightly higher-visibility activity with FBR …and they can again forever track you. In other words, corrupt people who avail amnesty (with or without tax filing requirement) shall be on FBR’s radar …for life.

            And the way our nation is finally progressing ….life long visibility is not good for health / mental peace of negative elements in society, including those in real estate.

          • YOUSUF LODHI

            on   said 

            3% (AMNESTY SCHEME) IS NOT APPLICABLE TO THOSE NON-FILER BUYERS WHO BOUGHT PROPERTY AFTER 01 JULY 2016

    • Rizwan
      Yes by DAWN it is fr people who are trapped in properties / bought before 1 July 2016
      Yesterday I was wondering what has happened to STOCKS

      Before amnesty scheme bill passed STOCKS AT 42,000
      TODAY 44,300

      So Trapped investors will withdraw money and will invest in STOCKS

      No advantage for real estate
      Only government will get the taxes
      Prices will be stagnant for long time

      Some realtors say that prices of June 2016 will be seen only in 2016

      Reply
      • rizwan

        on   said 

        THIS IS BECOMING VERY CONFUSING AS SOME NEWSPAPERS AND TV IS SAYINBG ITS FOR TRANSACTIONS THAT WILL HAPPEN AFTER 1ST JULY ALSO WHILE DAWN HAS A DIFFERENT VIEW…BUT THEN AGAIN DAWN CONTRADICTS ITS STANCE BY SAYING THAT IT WILL BE PAID BY BUYERS…THEN AGAIN IF ITS FOR BUYERS THAN IT WILL ALSO BE AVAILABLE FOR PPL AGFTER 1ST JULY AS THEY WILL BE THE NEW BUYERS NOW…..VERY CONFUSING SITUATION

        Reply
        • Rizwan
          DAWN is right that this scheme is for buyer

          WHY USING WORD FOR BUYER
          Actually this amnesty tax will be collected by registry team / registrar. or buyer has to pay amnesty scheme tax. A Law that collect tax on registry.
          SELLER WAS ONCE BUYER SO THAT PERSON WILL PAY TAX ON REGISTRY VALUE
          SO IT HAS TO BE PAID BY BUYERS

          Reply

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