The National Tax Number (NTN) is likely to be made
mandatory for the purchase of real estate from the fiscal year
Informed sources told PAGE that the federal
government was actively considering the NTN condition for the purchase
of property with the objective to expand tax-base, identify the source
of income of the buyers and to discourage involvement of black-money
in this business, a senior federal government official said. A number
of sweeping changes are underway, in this regard.
In the current budget, the government made
compulsory the NTN condition for the purchase of new car, which proved
successful and same strategy might be adopted for the real estate
business from 2005-06. The government was also weighing different
options regarding the imposition of federal tax on the sale and
purchase of real estate which include the levy of sales tax, or
capital gain tax on stock transactions.
The official also disclosed that a vast majority of
buyers of property had not been providing their National Identity
Cards to the Registrar Office in Lahore, dealing with the sale and
purchase record of property.
He said that the CBR had obtained a complete record
of the buyers and sellers of the real estate in Lahore and the
scrutiny of the record that led to the disclosure that a vast majority
of the buyers, especially in big cases, had not attached the copies of
ID cards, leaving no clue to their proper identification, etc. He,
however, said that the sellers had attached their ID cards with the
This scribe further learnt that the CBR had written
a letter to the Chief Secretary Punjab a few days back, raising the
issue of non-attachment of new ID cards by the buyers of the property.
The CBR has requested the Chief Secretary of the
Punjab to ensure that in future the ID cards of the buyers are
attached with the sale deeds so that the tax authorities could find a
clue to the buyers.
Meanwhile, a senior official of the finance
ministry also told this correspondent that the federal government was
considering incorporating an amendment in the existing Income Tax
Ordinance that would enable the tax authorities to seek identification
and record of the buyers of property in the overseas schemes,
He said that under the existing IT law, the CBR had
not been empowered to obtain such information from the private
business concerns, engaged in the booking of commercial and
residential property in overseas schemes.
He pointed out that several Pakistanis have
invested over two billion rupees in real estate schemes in Dubai, but
the tax authorities are unable to collect the information and record
about the local investors mainly because of non-provision in the
existing IT law.
He said that the tax measures to be introduced for
real estate business in coming budget might decelerate the business,
but it would gradually stabilize. It is worth noting that the property
business is facing a serious slump due to crash of stock market and
reports of the levy of tax in the coming budget. However, the fact
remains that the much rooming of unscrupulous elements in the real
estate business have enhanced the risk element in the real estate
business which calls for some regulations to carry the business which
most of the time involves the life time earnings of the low income
group. The registration of the real estate or property dealers with a
bank security will be highly commendable for an effective check of
forgery and fraud in the transaction of the property.
Actually, the introduction of NTN in the real
estate transactions is a part of the drive launched by the CBR for
expanding tax base in the country.
Though the collection performance looks quite
impressive, with net receipts totaling Rs403 billion which exceeded
the target for the first three quarters of the financial year, yet
most of the revenue was collected from the existing tax payers. The
achievement of the cumulative July-March 2005 tax target owes in large
part to the unusually high direct tax receipt during first half of the
financial year. The large variance between the projected receipts and
actual collections is, however, disturbing, raising concerns that
achieving the annual target may prove stiff.
The below target tax receipts in the face of higher
GDP growth means that the tax-to-GDP ratio is likely to drop for a
second successive year. This is disturbing, given that this ratio is
already once of the lowest in the region, claims the State Bank of
In the recent years, the government has made
significant gains in containing expenditure growth, while
simultaneously increasing developmental spending. However, the latter
needs to accelerate if economic growth is to be maintained and poverty
rates are to decline. The required increase in developmental spending
will not be possible unless the tax to GDP ratio was stabilized at
significantly higher levels.
The importance of broadening the tax base and
improving buoyancy is also underlined by the high dependence of
overall government revenues on potentially unsustainable or uncertain
sources. For example substantial contribution to non-tax revenue is
from payments from logistic support. The disbursement is not likely to
continue in the long term. The oil development surcharge has also
emerged in recent years as a major source of revenue. However, current
high international prices and the impact of these on domestic economy
indicate that this levy may be insupportable at current levels.