ISLAMABAD, May 30: The government has in principle decided to impose a flat rate of two per cent capital value tax (CVT) on immovable property in the Islamabad Capital Territory (ICT), Dawn has learnt.
The budget makers have given a final nod to the proposal at a high-level meeting on Wednesday.
The immovable property includes plot, house, shop, flat, bungalow, or any other property that remains in possession of same owner for quite sometime.
An official, who is privy to the development, told Dawn that the proposal had been finalised, but subject to the approval of the cabinet.
Under the 18th Amendment, the federal government cannot impose taxes on property which now falls in the jurisdiction of the provincial government. However, the federal government has the authority to impose such taxes in the Islamabad territory, the official added.
In the past, Federal Bureau of Revenue (FBR) had tried to introduce multiple CVT rates on immovable property, but had to withdraw following pressure from ‘land mafia’. But experts believe this time the lower rates will encourage the people to pay the tax.
The experts said that the imposition of CVT on land transactions would not only yield additional revenue for the government, but bring the real estate sector in the tax net.
The former president of Islamabad Chamber of Commerce and Industry (ICCI) Munawar Mughal, however, criticised the government’s move to impose the capital value tax.
He said it was against the government’s announced policy of levying no new taxes in the next budget.
Mr Mughal said people living in the capital were already facing problems of double digit inflation. The constant increase in energy and oil prices has fueled inflation especially of food in the recent past, he added.
At the same time, the businessman said even the property price did not increase in the way it had been projected. There is no buyer for the property, he said, adding that those who had invested in property were not even getting their original price.
On the other hand, tax officials are optimistic that the proposal will yield sufficient revenue for the government.
However, this collection will depend on strict enforcement and monitoring of all such transactions.