Mohsin Siddiqui (Chief Reporter) 

The government of Pakistan is likely to implement an increase in the advance tax on the purchase of immovable properties by non-filers in the upcoming budget for the fiscal year 2023-24. This proposed measure comes as part of ongoing discussions between the Federal Board of Revenue (FBR) and the International Monetary Fund (IMF), aiming to boost revenue collection through heightened taxation on real estate transactions.

In the current fiscal year, the FBR has imposed a 3% tax on filers and a 10.5% tax on non-filers for the purchase of immovable property. This taxation policy has enabled the FBR to collect approximately Rs80 billion. However, in light of the IMF’s recommendations, there is a strong push to increase the advance withholding tax specifically for non-filers to further enhance revenue.

Proposed Tax Adjustments

The discussions with the IMF have led to several proposals for adjusting the tax rates. The new structure under consideration suggests the following:

1. Properties Valued Up to Rs50 Million:
   1. Filers: 3% tax
   1. Non-Filers: 6% to 7% tax
2. Properties Valued Between Rs50 Million to Rs100 Million:
   1. Filers: 4% tax
   1. Non-Filers: 12% tax
3. Properties Valued Over Rs100 Million:
   1. Filers: 5% tax
   1. Non-Filers: 15% tax

Sources indicate that if the parliament approves these proposed tax rates, the FBR could potentially collect over Rs100 billion in the next fiscal year. This significant increase in revenue would be crucial for Pakistan, especially in addressing budgetary deficits and fulfilling fiscal obligations.

The IMF’s involvement underscores the importance of implementing robust tax policies to stabilize the country’s economy. The IMF has consistently emphasized the need for Pakistan to enhance its tax revenue by broadening the tax base and ensuring that non-filers contribute their fair share. By increasing the advance tax on non-filers, the government aims to discourage tax evasion and promote a more equitable tax system.

The proposed tax increase is part of a broader strategy to improve Pakistan’s fiscal health. Enhanced revenue collection from real estate transactions can provide the government with the necessary funds to invest in critical infrastructure projects, social services, and economic development initiatives. Moreover, a well-regulated real estate market can attract more legitimate investments, fostering long-term economic growth.

While the proposed tax hikes aim to boost revenue, they also pose potential challenges. Higher taxes on non-filers may discourage property investments, particularly among individuals who are not regular tax filers. This could lead to a slowdown in the real estate market, impacting related industries such as construction and housing.

To mitigate these risks, the government must ensure that the tax policy is implemented transparently and effectively. Providing clear guidelines and simplifying the tax filing process can encourage more individuals to become compliant filers. Additionally, public awareness campaigns highlighting the benefits of paying taxes and the potential penalties for evasion could further enhance compliance.

The government’s proposal to increase the advance tax on the purchase of immovable properties by non-filers in the 2023-24 budget reflects a strategic effort to boost revenue collection and address fiscal challenges. With the potential to generate over Rs100 billion, this measure underscores the importance of a fair and comprehensive tax system. As Pakistan moves forward with these changes, the collaboration between the FBR and the IMF will play a crucial role in ensuring successful implementation and achieving the desired economic outcomes.