Govt may seek IMF nod for fixed tax regime

Pakistan government is considering seeking International Monetary Fund’s (IMF) consent for introducing a fixed tax regime for builders and developers to boost the construction sector and allow construction of taller buildings in the city of ports.

In this regard, the Association of Builders and Developers of Pakistan (ABAD) sent a letter to the IMF a couple of days ago for a separate meeting to explain how the fixed tax regime would be beneficial to generate higher amount of tax revenue for the government.

Earlier, the Federal Board of Revenue (FBR) had worked out modalities and mechanism for the regime. However, IMF conditioning under its latest $6bn loan programme restricted the government from moving forward with the plan.

Prime Minister Imran Khan constituted a high-powered committee on Friday to deliberate upon the fixed tax regime with representatives of ABAD.

“Adviser to PM on Finance and Revenue Abdul Hafeez Shaikh is the chairman of the committee. He is scheduled to chair a meeting in this regard on Monday. FBR chairman Shabbar Zaidi is one of the three-four members of the committee,” ABAD former chairman Muhamed Hasan Bakshi said. He was among the businessmen who met with PM Imran on Friday.

Earlier in October, the FBR worked out a fixed-tax of Rs210 per sq ft to be paid by the builders and developers on the construction of commercial buildings nationwide.

The rate for residential buildings would vary from city to city, while a waiver of up to 90% would be available on low-cost housing schemes.

The tax would be paid in advance. The construction of each building would be completed in a maximum of three years.

The fixed tax regime is proposed to replace the 33% tax on income from construction projects and an advanced tax on services being paid by the builders and developers at present.

The tax would also bring an end to the assessment of projects by the FBR and close the door for bribes and corruption.

“We have assured PM Imran that the fixed-tax regime would double the amount of tax revenue for the government compared to the highest-ever taxes collected from the construction sector in any of the past 72 years,” said Bakshi, who is also a member of the prime minister’s task force on housing.

“He (PM Imran) has checked with the FBR chairman the fixed tax would double the amount of tax revenue from real estate generate construction activities and help document the economy,” said Arif Habib Limited, Chairman Arif Habib, who was also present in the meeting.