The government is considering a significant reduction in tax rates to stimulate business activities and revitalize Pakistan’s sluggish real estate market.
According to sources, comprehensive proposals have been prepared to lower transaction-related taxes, with the government planning to take the International Monetary Fund (IMF) into confidence before finalising the measures.
Key tax reforms being considered
The government aims to ease property purchases for overseas Pakistanis. One of the key proposals includes reducing the advance income tax from 4% to 0.5%. Additionally, the plan suggests cutting down the federal excise duty and abolishing the late filer category, which has long been a barrier for many investors.
Sources indicate that a high-level committee, formed under the prime minister’s directives, has completed its recommendations. A comprehensive package is expected to be announced soon after the approval of the prime minister and taking the IMF into confidence.
Experts weigh in
Real estate experts are optimistic about the potential impact of these reforms. Chaudhry Abdul Rauf, a well-known figure in the property sector, believes that such measures are crucial not only for the real estate industry but for Pakistan’s overall economic growth.
“The kind of potential we have in the real estate sector is immense. If the government formulates long-term policies, whether related to taxation or other areas, it can stimulate aligned industries and strengthen Pakistan’s economic base,” Rauf stated.
Experts also suggested that abolishing the requirement to declare the source of income for property transactions worth up to Rs30 million could significantly boost market activity.
Officials from the Federal Board of Revenue (FBR) have acknowledged that the steep rise in property-related taxes during the current fiscal year has led to a sharp decline in real estate transactions -- by nearly 50%. This drop has adversely affected tax revenues, highlighting the urgent need for reforms.
“The FBR can collect far more revenue if it adapts its tax framework to current market conditions,” Rauf emphasized. “Reducing taxes for overseas Pakistanis, cutting capital gains tax, and lowering adjustable advance taxes can rejuvenate the sector.”
The government plans to present these proposals during the upcoming visit of the IMF Economic Review Mission.
