Pakistan Tax Amnesty Scheme 2019 and Real Estate Property Market
Recently PTI government has announced its first tax amnesty scheme. In past tax amnesty schemes were introduced in 1958, 1969, 1976, 1986, 1997, 1999, 2008 and 2016. Unfortunately all schemes failed to increase the tax results. Let’s discuss the impacts of Pakistan Tax Amnesty Scheme 2019 on real estate sector.
According to the Special Assistant to the Prime Minister on Accountability Mirza Shahzad Akbar; under the bailout agreement with IMF the date of Amnesty Scheme can’t be extended beyond 30 June 2019.
Who can and can’t avail Pakistan Tax Amnesty Scheme 2019
This scheme is available for individual defaulters and companies to declare their assets. A golden chance to whiten the money.
The scheme cannot be availed by individuals holding government positions after 2000
The scheme will not be applicable on cases being heard in court
Salient features of Pakistan Tax Amnesty Scheme 2019
Assets within the country and abroad (except for real estate) can be whitened after paying a rate of 4%. The whitened cash assets will have to kept in Pakistani bank accounts.
People who want to keep their whitened money abroad, a rate of 6% will be charged.
1% Tax for those declaring their properties by 30 June 2019 (property value will be considered 1.5 times more than the FBR Rate).
Why government has offered a tax amnesty scheme?
PM Imran Khan has said that he is against such schemes. But he wants that people should avail the last chance to declare their assets (benami bank accounts & properties and other assets). But according to Finance Minister Hafeez Sheikh, the amnesty scheme is offered so that tax net can be increased as Pakistani shadow economy or black economy is 70% whereas real economy is just 30%.
Impact of amnesty scheme on real estate sector
Unfortunately amnesty schemes have always failed in Pakistan. Results will be same this time. The following factors will greatly contribute to the failure of amnesty scheme;
Firstly there is no tax culture in Pakistan as people prefer to remain non filers.
Secondly most people consider such schemes as traps.
Thirdly duration of amnesty scheme is till 30th of June (just 45 days).
Reaction of estate agents
Most realtors have already marked the scheme as a complete failure because of wrong timing and short duration. Dealers say that amnesty scheme has failed to uplift the stagnant property market.
Dealers also said that property market will see a boost when property valuation rates and bank interest rates will fall. Unfortunately we will see increase in property valuation rates and bank interest rates in the coming months.
Prices are 40% down from peak of 2016 but haven’t bottomed out yet. So property market will be stagnant for years to come.