Pakistan: Frontloading Taxation on Real Estate Transactions – Appraising an Abrupt Tax Policy Choice

Muhammad Ashfaq Ahmed, Ikram Ali Malik and Nasreen Nawaz

MPRA Paper from University Library of Munich, Germany

Abstract: Until 2012, Pakistan’s real estate sector painted a paradoxical situation, in that, while on the one hand, it was the storehouse of the bulk of Pakistanis’ wealth, on the other, it was as good as tax free. The Federal Government deftly leveraging an apparently drafting change in the 1973 Constitution made vide 18th Amendment adopted in 2010, sneakily treaded into what traditionally was considered an exclusive provincial tax domain by introducing capital gains tax on immovable assets vide Finance Act, 2012. Similarly, a negligible withholding tax rate on seller was also imposed at transaction (registration) stage, which was followed by an identical buyer’s tax in 2014. The past decade has seen the pendulum being shifted completely. The sector being the most profitable, yet contributing practically nothing to the national exchequer, has not only been at the centre stage of public debate, in media’s spotlight, but also under the government’s rather heavier tax hammer lately. While the PTI government’s excessive incentivization may have led to sucking much of the national wealth into the so called “non-productive” real sector, the PDM’s excessive taxation may be tantamount to virtually choking the real estate market with all its negative economic fallouts. The Finance Act, 2024, may prove to be the proverbial last nail in real estate’s coffin. This paper, adopting a simple, straightforward, and focused approach stocktakes the steep rise in taxation of real estate sector at transaction stage to critically gauge its impact on the real estate market (defined in terms of number of transactions undertaken) as well as the tax revenue that it generated, and proposes a suitable course correction.

Keywords: Real Estate; Withholding Taxation; Transaction Cost (search for similar items in EconPapers)
JEL-codes: H0 H2 H21 H22 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/128641/1/MPRA_paper_128641.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:128641

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().