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Punjab: Less than five-marla residences in posh localities to be taxed

LAHORE: The Punjab government is likely to take exempted residential property in the tax net under the rational value formula in the next financial year to enhance revenue generation from local resources, an official of the Punjab government told Daily Times on Tuesday.

The Finance Department, with the technical support of the Excise and Taxation Department, would present a proposal to the Resources Generation Committee headed by Punjab Finance Minister Tanveer Ashraf Kiara, he added.

Additional earning: He said the Punjab government would earn an additional Rs 400 million if the committee approved the proposal. The Punjab government had exempted one-marla to five-marla residences from property tax net in the 2004-05 annual budget. A total 260,000 houses were excluded from the property net under the scheme, resulting in a loss of Rs 40.5 million to the Punjab government. The official said the Punjab government was also facing heavy expenses in lieu of various pro-poor schemes.

He said the revenue generation during the current financial year had dropped visibly as all revenue generating agencies and departments managed to collect only 40 percent (Rs 22 billion) of the target (Rs 56 billion) from indigenous resources.

The Finance Department had previously informed Chief Minister Shahbaz Sharif that poor law and order, general economic slowdown and abrupt transfers at various revenue generating departments and agencies were the main causes for the low recovery.

The official said the Punjab government would also most likely receive a lower share from the divisible pool under the National Finance Commission award as the Federal Board of Revenue had revised its estimated revenue collection from Rs 1,350 billion to Rs 1,200 billion. He said the revenue generation had decreased due to low business activity in the country – indirectly linked with global recession – and poor law and order.

The official said the Finance Department had decided to recommend that a rational value property assessment mode be introduced and the exemption should be withdrawn. He said the ongoing exemption was not fair as it was entirely based on the area of the residence, adding that several luxury apartments/houses measuring less than five marlas in posh areas were exempted whereas the houses measuring one kanal in low-income localities were taxed. The Finance Department recommended that in order to remove this disparity expensive houses measuring less than five marlas located in posh areas should be taxed while residences even above five marlas that have a lower tax value than the residential house assessment be exempted.

The government would have to amend the Urban Immovable Property Tax Act of 1959 to introduce the rational value tax. The Resource Generation Committee would make the decision. Additional Chief Secretary Javaid Aslam confirmed that some developments in this regard were in process.

Source: Daily Times

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