The Federal Tax Ombudsman (FTO) has revealed the Federal Board of Revenue (FBR) has failed to devise a standardized mechanism for valuation of properties in line with fair market value in major urban cities worth trillions of rupees.

This finding of FTO can easily be attributed to the FBR’s failure to generate much-needed revenues from the largest potential sector. The story does not end here but the FTO findings also disclose that the Directorate General Immoveable Property (IMP) was established in 2018 after the enactment of a law approved by the parliament but this office, having a clear mandate to tap the potential of property sector, never became functional.

The FTO started its own motion investigation under Section 9(1) of the FTC Ordinance, 2000 after an extensive review of DC rates and different valuation SROs issued by FBR and market analysis by the FTC’s research wing.

The research wing found significant anomalies, inconsistencies, infirmities, and discrepancies in valuation tables of immovable properties in SRO 1734(1)12022 dated l3th September 2022. In response, the FBR raised objections regarding the jurisdiction of this office and stated that the office of the FTO had no jurisdiction over the case.

The FTO found glaring discrepancies in valuation rates of fair market value determined by the FBR in the case of Rawalpindi and found that the SRO 1734(1)12022 dated l3thSep 2022 for Rawalpindi district, when compared with the neighboring ICT Islamabad, appears strikingly deficient, lopsided and sketchy.

For instance: a. Heart of Rawalpindi city like Raja Bazaar, Asghar Mall, Sadiqabad, Pirwadhai, and other adjoining residential & commercial areas have not been even touched. Most of the residential and commercial locations of Rawalpindi Cantt are also missing like Naseer Abad, Khayaban-e Sir Syed, Morgah, etc. Omissions of valuation rates of agricultural lands and Rawalpindi district rural are glaringly visible.Tehsil Taxila is completely missing. Valuation of built-up/constructed area is completely missing. Other Tehsils of district Rawalpindi have been marginally touched, especially Murree where at detailed and valuation would be revenue yielding. SRO is plagued with completely unexplainable and insane entries.

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

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

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

The perusal of SRO 1734 reveals that FBR authorities have not bothered to check the publicly available market rates in said schemes/projects while issuing the SRO in question. The FTO has found that no such effort has been made by the FBR nor has the filed formation developed any method, which could be followed by the valuation committees within their jurisdiction.

Besides, there is no standing anomaly committee formed at any level to address concerns of the stakeholders in case inconsistencies are found or wrong valuation is made by the committees. Besides, the relevant Directorate General of Immoveable Property couldn’t add any value as it remained non-functional. These omissions led to lack of uniform method of valuation, which resulted in inconsistency, inappropriate valuation, undervaluation/overvaluation and arbitrary exercise of powers.

All these lapses constitute maladministration in terms of section 2(3)(i)(b) and (ii) of the FTC Ordinance, 2000. Therefore, corrective measures are required by FBR in the next revised valuation table.

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