LAHORE: The new property tax imposed on ‘utilised’ plots which aims to create more provincial revenues is likely to burden ordinary citizens and pensioners rather squeeze the speculative trade of real estate.

The Punjab government has fixed two years of delivery of possession to the owner for the levy of tax.

The government amended the Punjab Immoveable Property Tax Act 1958 through the Punjab Finance Bill 2016, paving the way for the provincial Excise and Taxation Department to collect property tax with different ratios for different categories on vacant plots in order to increase tax base and check speculative trade of real estate.

Other objectives of the tax are to improve of supply of housing by discouraging retention of vacant plots for long periods of time and strengthen local government tax base.

Officials initially estimate the revenue collection of around Rs250 million in the current fiscal year 2016-17.

The tax, which has actually been imposed to bring ‘unbridled’ real estate sector into tax net, is going to pass major relief to the same sector as the Punjab cabinet had reportedly given approval that the tax would be levied after two years of delivery of possession to the owner against the proposal of the E&T Department which did not want the time frame.

Informed sources privy to the development told Dawn the two-year relaxation would ultimately provide relief to property investors and totally burden ordinary citizens including pensioners who retain property for personal reasons.

They said the real estate sector would easily skip tax for seven categories throughout the province because of time period relaxation ‘intentionally’ given to them.

Sources, however, claimed the tax ratios for vacant properties would be affordable for citizens.

Moreover, the provision relating to exemption of building and lands used exclusively for educational purposes is proposed to be clarified by adding an explanation.

Punjab E&T Director General Akram Ashraf Gondal said the department, despite having provision in the law for collecting property tax from lands, did not invoke it in the past but the amendment had now empowered the department to tax the vacant land/plots as a policy.

He said the department was planning to start a detailed survey of such empty residential, commercial and industrial properties with the help of city development authorities, cooperative housing societies and local administrations to compile a data and notify tax as per rate of land, hoping to complete the process by the end of September 2016.

Gondal further said the new amendment would help the provincial government to collect more revenues, document provincial economy and overcome speculative business in sale and purchase of properties.

He said the tax with multiple and reasonable rates would be applicable on transfer and acquisition of property.

The amendments: As per amendment in Act V of 1958, (a) In section 2, after clause (a) the following new clause (aa) she be inserted: “(aa) ‘buildings and lands’ include vacant plots or a parcel or portion thereof having fixed boundaries intended for specific purpose including residential, commercial and industrial use”.

(b) In section 4: (i) in clause (d), the following explanation shall be inserted and shall be deemed always to have been so inserted: Explanation: The expression ‘buildings and lands or portions thereof’ shall mean the buildings and lands or portions thereof owned by the government or by a body owned or controlled by the government”

(ii) For clause (i), the following shall be substituted: “(i) One residential house or vacant plot, measuring an area not exceeding five marla , used or to be used for residential purpose except a residential house or vacant plot with annual value of more than five thousand rupees situated in a part of a rating area and categorised as category-A area” and

(iii) after clause (i), the following clause (j) shall be inserted:

“(j) a vacant plot whose possession is handed over to the owner for the first time and remains vacant or without construction for a period not more than two years from date of delivery of possession.

Explanation-If possession is handed over to any owner, the period of two years shall be reckoned from the date even if the plot is transferred to a subsequent owner.”

(c) In section 5-A, for the full stop, a semi colon shall be substituted and thereafter, the following proviso shall be inserted:

“Provided that the annual value of a vacant plot shall be in accordance with the valuation table notified for respective locality of the rating area” and

(d) after section 16, the following section 16-A shall be inserted: “The authority responsible for registering an instrument of sale, gift or exchange of immoveable property shall not register the instrument unless it is satisfied that the outstanding tax has been paid.”

Published in Dawn, July 6th, 2016