In a move to ensure the precise valuation of immovable properties across the country, the Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to take action. Let’s break down this directive and understand its significance.
Investigating Valuation Anomalies
The FTO initiated an Own Motion investigation, as per the FTO Ordinance of 2000, after a comprehensive review of DC rates, valuation SROs issued by the FBR, and market analysis conducted by FTO’s research wing. The research uncovered significant anomalies, inconsistencies, and discrepancies in the valuation tables for immovable properties. As a response, comments were sought from relevant authorities, including the Secretary of the Revenue Division and the Regional Tax Office in Islamabad.
A Needed Directorate General
In 2018, the ‘Directorate General of Immovable Property’ was established to address property valuation issues. However, it’s concerning that this Directorate has remained non-functional since 2019. Valuation of immovable properties falls under the purview of this Directorate, making its inactivity a point of concern.
The FTO has put forth a series of recommendations to address these valuation challenges:
- Development of Standard Operating Procedures (SOPs) for valuing immovable property.
- Immediate activation of the ‘Directorate General of Immovable Property.’
- Formation of a standing anomaly committee to address valuation-related grievances.
- Hiring competent and experienced valuers for property valuation to ensure transparency.
- The formulation of a schedule for periodic revision of valuation tables.
Transition to In-House Valuation
Previously, real estate-related withholding taxes relied on valuations by District Authorities Revenue. However, this practice has shifted in major cities, with FBR introducing its in-house valuation regime. This change aims to align valuations with fair market values more accurately.
Addressing Valuation Discrepancies
To address valuation issues effectively, the FBR issued new valuation tables for immovable properties. Unfortunately, third-party examinations revealed numerous anomalies and discrepancies in these tables. These included omissions, valuation loopholes, undervaluation, and tabulation errors. These issues have resulted in a lack of transparency and fairness in the implementation of tax laws in the real estate sector.
In conclusion, the FTO’s directive aims to rectify valuation problems and enhance transparency and fairness in the taxation of immovable properties. It calls for immediate action and the utilization of the Directorate General of Immovable Property to establish a consistent and accurate property valuation framework. This move seeks to benefit both the government and taxpayers by ensuring fair and equitable property taxation.