FBR does not have a standardized property valuation mechanism: FTO

• The report highlights the FBR’s inability to generate significant revenue.
• Significant anomalies, inconsistencies, deviations were found.
• FBR says FTO had no jurisdiction over immovable property.

ISLAMABAD: The Federal Tax Ombudsman (FTO) has exposed the failure of the Federal Board of Revenue (FBR) to come up with a standardized property valuation mechanism aligned with fair market value, particularly in large urban cities where properties worth trillions of rupees, he said The news.

This FTO report highlights the FBR’s inability to generate significant revenue in this critical sector. Furthermore, the FTO findings also stated that the General Directorate of Real Estate (IMP) was created in 2018 through a law passed by Parliament, with a specific mandate to harness the potential of the real estate industry, but the office remained non-functional.

The FTO initiated an independent investigation under Section 9(1) of the FTC Order, 2000, following a comprehensive review of DC rates, various valuation SROs issued by the FBR and a market analysis conducted by the FTC’s Research Wing.

The investigation wing found significant irregularities, inconsistencies, weaknesses and discrepancies in the property valuation tables in SRO 1734(1)12022 dated 13 September 2022. In response, the FBR raised objections regarding the jurisdiction of this office and stated that the FTO’s office did not had jurisdiction over the case.

The FTO found glaring discrepancies in the fair market value valuation rates fixed by the FBR in the case of Rawalpindi and found that SRO 1734(1)12022 dated 13 September 2022 for Rawalpindi district, as compared to neighboring ICT Islamabad, appears strikingly inadequate, skewed and sketchy.

For example, the heart of Rawalpindi city like Raja Bazaar, Asghar Mall, Sadiqabad, Pirwadhai and other adjacent residential and commercial areas are not even touched. Most of the residential and commercial localities of Rawalpindi Cantt are also missing like Naseer Abad, Khayaban-e-Sir Syed, Morgah etc.

The omissions of the valuation rates of agricultural land and the rural area of ​​Rawalpindi are clearly visible. Tehsil Taxila is missing altogether. The valuation of the built-up area is completely missing. Other Tehsils of Rawalpindi district have been marginally touched especially Murree where detailed and valuation will generate revenue. Statutory Regulatory Orders (SROs) are plagued by completely unexplained and illogical entries.

The valuation of shops in shopping plazas is completely different from the valuation of plots of land. The SRO completely ignored the valuation of the shops located in various malls of Tehsil Rawalpindi. While determining the valuation for Askari I to XV, it has been completely ignored that the main features of Askaris are apartments. Appraisal of apartments is a completely different segment, which has not even been touched upon.

The real estate sector has seen a boom in the recent past from July 2019 onwards as a result of the tax amnesties given to this sector (section 100D of the Income Tax Ordinance).

Rawalpindi is home to a large number of approved (by the Rawalpindi Development Authority) unapproved/irregular housing companies/schemes/schemes. Among them, some of the famous builders and developers have launched various projects and the starting prices offered by the sponsors/owners are available in the public domain, e.g. on various marketing company websites.

A perusal of SRO 1734 reveals that the FBR authorities did not bother to check the publicly available purchase prices in the said schemes/projects while issuing the said SRO. The FTO found that no such effort has been made by the FBR nor has the filed formation evolved any methodology, which could be followed by the valuation committees within their jurisdiction.

Besides, no standing committee of anomalies has been constituted at any level to address the concerns of the stakeholders in case any inconsistencies are found or wrong valuation is done by the committees. Besides, the relevant General Directorate of Real Estate could not add value as it remained non-functional.

These omissions led to a lack of uniform valuation methodology, which resulted in inconsistency, improper valuation, under/overvaluation and arbitrary exercise of powers.

All these lacunae amount to maladministration in terms of section 2(3)(i)(b) and (ii) of the FTC Ordinance, 2000. Therefore, remedial action is required by the FBR in the next revised valuation table.