• Report highlights FBR’s inability to generate substantial revenue.
• Significant anomalies, inconsistencies, discrepancies were found.
• FBR says FTO had no jurisdiction over immovable properties.

ISLAMABAD: The Federal Tax Ombudsman (FTO) has revealed the Federal Board of Revenue’s (FBR) failure to devise a standardised property valuation mechanism that aligns with the fair market value, particularly in major urban cities where properties valued at trillions of rupees, reported The News.

This report by the FTO highlights the FBR’s inability to generate substantial revenue in this crucial sector. Moreover, the FTO’s findings also mentioned that the Directorate General Immoveable Property (IMP) was formed in 2018 through a Parliament-approved law, with a specific mandate to tap the real estate sector’s potential, but the office remained non-operational.

The FTO began an independent investigation under Section 9(1) of the FTC Ordinance, 2000, after a comprehensive review of DC rates, various valuation SROs issued by the FBR, and market analysis conducted 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 September 13, 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 neighbouring ICT Islamabad, appears strikingly deficient, lopsided and sketchy.

For instance, the heart of Rawalpindi city such as the Raja Bazaar, Asghar Mall, Sadiqabad, Pirwadhai as well as other adjoining residential and commercial areas have not even been 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. The Statutory Regulatory Orders (SROs) are plagued with completely unexplainable and insane entries.

The 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 the valuation for Askari I to XV, it has been completely ignored that the main features of Askaris are apartments. The 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 a 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 the 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 the concerns of the stakeholders in case inconsistencies are found or the wrong valuation is made by the committees. Besides, the relevant Directorate General of Immovable Property couldn’t add any value as it remained non-functional.

These omissions led to a lack of a 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.