LAHORE, April 24: The Punjab government is said to have opposed a federal proposal for further reduction of the aggregate rate of stamp duty and registration fee on property to one per cent from the existing five per cent.

According to sources in the provincial finance department, the National Housing Authority (NHA) on behalf of the federal housing and works ministry had asked the provinces to implement the recommendations made in the National Housing Policy, 2001, in order to boost the construction industry in the country.

A letter received by the finance department from the NHA points out that the provinces need to bring down their aggregate taxes on the housing sector/property as an incentive for the housing sector.

The housing policy was announced by the military government to revive and boost the construction industry by allowing certain incentives and tax reductions. According to the 1998 census, there is a backlog of 4.3 million housing units in the country. The country requires at least 570,000 new units every year to overcome the housing shortage in next 20 years. On the other hand, only 300,000 units are said to be constructed annually, adding 270,000 units to the housing backlog annually.

The Punjab has, however, opposed to the proposal on the grounds that stamp duty and registration fee on urban and rural property was one of the major source of income — around Rs4.5 billion — generated by the province from its own resources. The property tax forms over 21 per cent of the province’s own receipts pitched at Rs21.35 billion for the current fiscal year.

“It is amazing that on the one hand the federal government is pressing the provinces to mobilize greater funds from their own resources and on the other hand they are being told to reduce the tax rates in the very few areas that they can tax on their own,” a finance department official told this reporter here on Thursday.

The official said the Punjab government had already reduced aggregate taxes on property from 17.5 per cent before 1999 to five per cent. “The federal government must allow us more funds to compensate for the loss we would be incurring due to reduction in the property tax as proposed in the housing policy,” he said.

At present, the government charges five per cent as stamp duty and Rs200 per sale deed as registration fee on urban property and four per cent as stamp duty and one per cent as registration fee on the rural property, according to the officials.

The official also said the letter sent by the NHA did not specify whether the incentive of tax reduction suggested in the housing policy was for the new housing schemes or individual units or both.