Senate panel rejects FBR move to acquire land from buyers

SOHAIL SARFRAZ & ZAHEER ABBASI

ISLAMABAD: The Senate Standing Committee on Finance has rejected the Federal Board of Revenue’s move to establish Directorate General of Immoveable Property with extraordinary powers to acquire land from buyers, arguing that it was provincial domain and cautioned that it would be declared unlawful before the superior judiciary.

In another major development, the finance committee has also rejected a proposal of the Finance Bill 2018 for charging fee on offshore digital services.

While reviewing the Finance Bill 2018, the Senate Standing Committee on Finance continued its proceedings here at the Parliament House on Friday under the chairmanship of Farooq H Naek and unanimously rejected the FBR’s proposal for establishing Directorate General of Immoveable Property through Finance Bill 2018-19. It has been recommended that the matter of DC rates and FBR’s powers of purchasing immovable properties be placed before the Council of Common Interests (CCI).

A detailed discussion took place on the issue of FBR’s powers to purchase immovable properties. However, the treasury member Musaddik Malik remained quiet over FBR’s move to get approval of panel of the Upper House of Parliament while all other members sternly opposed it. 

Naek said, “I want to give advice to the FBR to withdraw this proposal from the Finance Bill 2018 otherwise there will be severe backlash from all sides. The government should take up this issue at forum of Council of Common Interests (CCI) for taking them into confidence for enhancing DC rates for valuation of property.” 

The FBR’s Member Tax Policy Dr Mohammad Iqbal told the committee that the Prime Minister announced economic reform package ahead of budget 2018-19 under which the government announced to get powers of acquiring land from the buyer if the fair market value was not declared at doubled rate.

“We are facing problem on valuation of property as the DC rates and FBR notified rates have failed to yield the desired results,” Dr Iqbal admitted before the committee.

Former Secretary Finance Dr Waqar Masood, who has been invited by the Senate panel on special invitation to get technical advice, said that the immoveable property was domain of provincial government and cautioned that it would stand nowhere. He proposed that the FBR could move Directorate General of Immoveable Property Tax because tax on gain of property was part of federal legislative list.

The senators including Farooq H Naek, Mir Ateeq and Mohsin Aziz strongly opposed the FBR for getting extensive powers through Finance Bill 2018.

Under the Section 230F of Finance Bill, the FBR has proposed that Directorate-General of Immovable Property shall consist of a director general and as many directors, additional directors, deputy directors and assistant directors and such other officers as the board may, by notification in the official gazette, appoint. 

The directorate-general may, subject to the provisions and conditions as may be prescribed, initiate proceedings for the acquisition of property for the reasons shall be initiated, where the directorate-general, on the basis of valuation made by it, has reason to believe that any immovable property of a fair market value has been transferred by a person, hereinafter referred to as the transferor, to another person, hereinafter referred to as the transferee, for a consideration which is less than the fair market value of the immovable property and that the consideration for such transfer as agreed to between the transferor and transferee has been understated in the instrument of transfer for the purposes of ? (a) the avoidance or reduction of withholding tax obligations under this Ordinance; (b) concealment of unexplained amount referred to in sub-section (1) of section 111 representing investment in immovable property; or (c) avoidance or reduction of capital gains tax under section 37.

The directorate-general may appoint any valuer or expert as it considers necessary for the purposes of determination of valuation including fair market value of immovable property. The mode and manner of appointment of a valuer or expert shall be as may be prescribed. The valuation made under sub-section (4) and reasons that consideration is less than the fair market value shall be recorded in writing.

No proceedings shall be initiated in respect of any immovable property after expiration of a period of six months from the end of the month in which the instrument of transfer in respect of such property is registered, recorded or attested, the Finance Bill 2018 proposed.

Under the Finance Bill 2018, a fee for offshore digital services shall be Pakistan-source income, if it is paid by a resident person, except where the fee is payable in respect of services utilized in a business carried on by the resident outside Pakistan through a permanent establishment; or borne by a permanent establishment in Pakistan of a non-resident person.

Every banking company or a financial institution remitting outside Pakistan an amount of fee for offshore digital services, chargeable to tax under section 6, to a nonresident person on behalf of any resident or a permanent establishment of a non-resident in Pakistan shall deduct tax from the gross amount paid at the rate specified in Division IV of Part I of the First Schedule, it added.