Recently, the Government of Pakistan (GOP) presented the federal budget 2022-23, proposing several tax measures including property taxes which have been increased excessively. The government increased Capital Gains Tax (CGT) by up to 15 per cent on the disposal of immovable properties within one year after the purchase.
Earlier, the advance tax on the sale/ purchase of the property was 1 per cent for filers and 2 per cent for non-filers. It has now been increased to 2 per cent and 5 per cent for filers and non-filers respectively. Furthermore, those who own more than one immovable property worth over Rs25 million shall be deemed to have received a rent equal to 5 per cent of the fair market value of the property and shall pay a tax at the rate of 1 per cent of its market value.
The proposed tax has negatively affected the construction sector, which is already suffering from inflation as steel prices are high and cement sales have contracted to 16%. Following the negative impacts of high taxes, the authorities, including The Rawalpindi Chamber of Commerce, have demanded to withdraw property tax on rental income and recommended giving more incentives to the construction industry to increase business activity. The proposed rental tax will discourage foreign investment as most overseas Pakistanis have invested in the real estate sector, including plots, houses, apartments etc.
Several authorities have demanded that the government review the new taxes imposed on the real estate sector to save the construction industry from the burden of unnecessary taxes and further problems. Furthermore, it has also been emphasised that the government should provide tax exemptions on machinery and technology imports to the industries of other sectors to promote industrialisation and boost our exports.