During the last two years, the officers of Excise and Taxation (E&T) department could be seen strolling in the streets and taking snaps of houses in different localities. They would be accompanied by constables of the department and representatives of the Urban Unit — a government entity responsible for urban planning and management.
People would hardly bother to ask the purpose of this exercise and often ignore these unknown visitors to their areas. But now the time has arrived when they will know, probably the hard way, what the purpose of those visits was. In fact, it was an exercise related to the reassessment/re-evaluation of self occupied, rented and commercial properties for imposition of property tax according to revised rates.
As property tax is imposed on the estimated rental value of a property, the E&T officials believe that the previous estimates were ridiculously low and calculated back in 2001-2002. Hence, there was a need to reassess these values according to the realities of the property market and increase the revenue collected under this head.
Property assessment/evaluation surveys have to be done every five years but could not be carried out during the last 12 years. The rental value is the assessed rent which a property would attract if it is given on rent.
While the provincial tax authorities call it rationalisation, the general public is extremely concerned about the ramifications this reassessment would have for them. For example, Khalid Parvez, President, All Pakistan Anjuman Tajran, complains that the rental value of category “A” commercial properties has been raised from Rs12 per square foot to Rs120 per square foot in one go.
This, he says, is totally in contrast to the realities on ground as everyone knows that businesses have suffered over this time and not increased 10 times. The government could increase the value if revenues had increased ten-fold over these 12 years.
He fears the property tax will increase at the same rate and add to the misery of the traders. If this happens, they would go for countrywide protests.
On the other hand, provincial tax officials claim that their task was to reassess the rental values of properties all over the province and they had nothing to do with the imposition of revised taxes. The approval for the survey, they say, was given by the caretaker chief minister of Punjab Najam Sethi, and the reassessment was done over a period of two years. The department has provided this baseline data to the government and it is up to it to apply a property tax rate on different categories.
Shahid Ghani, a lawyer dealing with tax-related cases, says that the people are confused on property tax and do not have an idea as to what the government is going to do. There are rumours of all types in the market and nobody bothers to clarify.
He says that fearing manifold increase in property taxes the people who have rented out their houses are trying to evict their tenants in a bid to avoid higher tax levied on rented properties. On the other hand, there are tenants who are blackmailing their landlords and threatening to inform the tax authorities about their rent agreements.
Ghani says if the confusion persists, the people will stop disclosing details of their tenants and introduce them as their friends or relatives. This will be a security threat as the law enforcing authorities require of the house-owners to share the antecedents of their tenants with the local police station.
Akram Ashraf Gondal, Director E&T, Region “A” Lahore, rejects the notion that the property tax will be increased 10 times in certain cases. He says that even though the rental value has increased by this much the rate of tax applicable to the rental value has been brought down to five percent from the previous 20-25 percent.
He says the people are complaining about multiplication of rental value but nobody talks about the applicable property tax rate which has been slashed five times.
Properties have been divided into seven categories, from A to G, depending on their worth in the property market and subjected to different formulas for the purpose of their reassessment. The rental value of category “A” properties have increased the most and that category “G” properties the least.
Gondal cites the example of commercial rented properties and says the overall tax increase under the new formula would be 100 percent for A, B, C and D categories and 88 percent for E, 56 percent for F and 50 percent for G categories.
The effect, he says, would be high on self-occupied residential properties as they were under-valued in the past assessments. Tax increase for these properties would be 187 percent for A category, 183 percent for B, 180 percent for C, 175 percent for D, 173 percent for E, 171 percent for F and 150 percent for G categories.
He says that news assessments were based on random surveys and on the basis of rents prevalent in different localities. In case there were too many disparities in an area, average rents were calculated on the basis of existing rents of sample properties.
For those who fear a bombshell will soon be dropped in the form of a property tax notice, there is a relief as will. The aggrieved will have a one month’s time to approach the office of the concerned director E&T. The director will hear appeals against assessments made by Excise and Taxation Officers (ETOs), seek the versions of both the ETO and the taxpayer and make a decision. If there is a need, he will inspect the assessed property himself or otherwise send his staff to do the same.
Besides, there is an online calculator available on the website of the E&T department which one can use to assess the property tax applicable on one’s property. This will curtail the arbitrary powers of the E&T officials.
The Punjab government claims that all the revenues collected by it will be spent on development works and the welfare of the people. But there are very few who buy this. Ahmed Raza, a resident of Gujjarpura Housing Scheme, maintains there is no reward for paying taxes religiously. “You have to bribe government officials in order to get your work done and access private school and health facilities for education and healthcare. Where is the state? Then why shall I pay the taxes?”
However, Akram Ashraf Gondal asserts that the government has taken several pro-people steps and provided tax relief to many. For example, he says, there is no property tax on five-marla houses except those which are located in “A” category areas. Besides, he says, the government is planning to give remission on the property tax calculated under different categories.
“There are reports that the government will not let the property tax increase by more than 50 percent on properties falling under any category,” he says.