PESHAWAR: The levy of heavy taxes on land transactions has brought the real estate business in the violence-hit Khyber Pakhtunkhwa a virtual standstill to the misery of people wanting to buy plots to build houses.

Three years ago, the federal government had imposed 0.5 per cent gain tax on plot transfer directly on the provinces, badly affecting the estate business in Khyber Pakhtunkhwa.

Despite reservations shown by the provinces, including Khyber Pakhtunkhwa, the federal government enhanced the same tax to 1 per cent last year.

Mazhar Wakil Durrani, president of the Peshawar Property Dealers’ Association, declared the imposition of taxes illogical and said the heavy taxation regime had adversely affected their businesses forcing investors to transfer capital to Islamabad, Lahore, Gwadar and Karachi.

Investors moving to Islamabad, Lahore, Karachi and Gwadar

In June 2014, the government had imposed withholding tax at the rate of two per cent on buyers, which was the last nail in the coffin of more than 1,000 estate dealers, who demand the immediate abolition of the levy.

Gain tax against which the association has also filed a case with the Peshawar High Court is totally illegal as it means plot sellers are required to pay the tax from the profit but the ground reality is that people are on the receiving end in the Regi Model Town (RMT) due to the chronic delay in the launch of the housing scheme with 26,857 housing units in 1998.

The president of the Peshawar Property Dealers’ Association said how losers could be made to pay taxes as ‘gain tax’ should be applicable when one earned from the sale of plot.

The RMT located on the Nasirbagh Road doesn’t have facilities like schools, playgrounds, parks, markets and sports complex due to which owners have no option but to sell their plots at lower than the market rate.

Lots of taxes have affected 70 per cent of land transactions.

Durrani said they had been paying capital value tax (CVT) for eight years without knowing where the money was going.

“We want the government to tell us about the use of these taxes. We want the money to be spent on improvement of civic amenities in the provinces,” he said.

The president of the Peshawar Property Dealers’ Association said CVT was payable on one kanal plot, which affected few people, but most transactions were made in small plots of 3, 5 and 7 marlas, where gain and withholding taxes were payable.Local dealers said taxes should be abolished in view of rapid urbanisation to enable the people to get plots and build houses on them.

According to them, besides speeding up work on the long-delayed RMT, the city also needs opening up of new phases in Hayatabad Township, where three more phases could be built.

Durrani said, “we are ready to pay taxes but these should be rationalised. We also want to know about the share of our province in the taxes we have been paying to federal government.”

According to him, currently, taxes are divided on buyers and sellers and deposited by dealers to be able to fulfil formalities regarding transfer of plots.

He said the association demanded amendments to by-laws on Hayatabad locality in view of rapid urbanisation and housing needs.

“Proper legislation is needed regarding designs and construction in houses to accommodate displaced population from Fata.

“Also, we need measures to help the Peshawar Development Authority manage affairs of Hayatabad. The authority should allow construction of attached bathrooms in houses to cater to needs of large families.”

Durrani said new maps like the ones developed by the Capital Development Authority of Islamabad should be introduced to meet modern day needs.

He praised the provincial government for streamlining the affairs of the local revenue department and demanded end to 10 per cent building tax in Hayatabad.

The tax is taken from the owner of the house after construction on covered area. Everyone pays taxes to the PDA before carrying out construction work.

“The tax is illogical,” he said.

Senior local government minister Inayatullah Khan told Dawn that the province had suffered a lot due to terrorism and therefore, it needed concessions from the federal government.

“We are taking measures to resolve the problems of the real estate business by taking up the matter with the centre,” he said.

The minister said after the introduction of 18th Amendment to the Constitution, taxation was the domain of the provincial government.

He, however, said atmosphere for heavy taxation was not appropriate and therefore, the centre would be approached for the purpose.

Published in Dawn, September 23rd, 2014