Netting property

Published April 18, 2018

THE most interesting part of the recently announced tax amnesty scheme is the portion that relates to undisclosed property and attempts to get the correct rates declared at the time of sale of land. The Voluntary Declaration of Domestic Assets Ordinance, which deals with the details of domestic assets being declared under the scheme, is a vast roster of the assets that can be declared under it. Included on the list are used and new cars, precious stones, machinery and accounts receivable by enterprises as well as stock in trade, and paper investments such as prize bonds and national saving scheme certificates. The drafters understand the breadth and scope of black money accumulation in Pakistan, and how businesses run their accounts and structure their balance sheets to conceal cash flows and assets. Financial adviser Miftah Ismail is perhaps entitled to some of his optimism that the scheme can yield billions of dollars and bring over a million people into the tax net, as he reiterated at a seminar in Islamabad recently.

In the area of property, the scheme is interesting because it brings a new element ie the powers that the state will now have to purchase any given property at specified prices within six months of a transaction. Secondly, the scheme will place restrictions on non-filers of income tax returns to be able to buy or sell property. Even if these two steps fail to realise a large amount of property under the scheme, it can be reasonably hoped that they will serve to reduce the volume of speculative money pouring into real-estate investments and help bring the land prices down. At the moment, land is beyond the reach of the average, law-abiding citizen, partly because of a shortage, but also because the property markets have become the safest haven for the vast black money hoards accumulated in our economy each year. Plugging its access to real-estate investments could add a serious cost to maintaining black money hoards. The government hopes this will be enough to ‘change the economic landscape’ of the country, as Mr Ismail has put it following the announcement of the scheme. That, however, remains to be seen.

Published in Dawn, April 18th, 2018

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