REAL estate in Pakistan is expensive. The advertisements in Sunday newspapers are evidence of this — the sales price quotes run into multiple millions of rupees. Given that each sales transaction is subject to tax, the federal and provincial governments ought to be earning significant amounts of revenue. That is the theory. In reality, the government earns only a tiny amount of the sum exchanged since property is officially registered at a fraction of its market value. The official price of the land, which is meant to be reviewed annually, is kept low by a nexus of corruption which deprives the government of tax revenue that would contribute significantly towards solving its financial problems. Real estate transactions are conducted in effec-tively two ‘stages’, the first where the payment is based on the official rate, and the second where the balance dictated by the market price is transferred. It is not just private individuals that defraud the public exchequer in this way. Government and other agencies such as the development authorities in Islamabad, Lahore and Karachi, the Defence Housing Authorities and Cantonment Boards in various cities are to a greater or lesser extent all colluders in the under-valuing of expensive real estate. Some banks offering mortgage loans issue more than one cheque.

It is therefore encouraging that early reports about the next budget say that there are plans to revise the system. A senior FBR official told this newspaper on Thursday that an exercise is under way to link the tax imposed on transactions to the market-rate value of property. If achieved, this would significantly improve the financial situation of the federal and provincial governments. However, the challenge faced by the FBR is daunting. It will face tough opposition from the people and organisations, many of them functionaries of the government, that are benefiting from the current system. The FBR must stand firm, though. The official value of real estate must match its market price. Real estate transactions involve massive sums of money and there is no reason why corrupt practices should deprive the government of its legitimate revenue.