No luxury tax in posh areas of Lahore

The Nation report by Salman Abduhu

The newly-introduced Luxury Tax in the recently-announced Punjab budget 2013-14 on homes of two and above two kanals is absolutely discriminatory and against fundamental rights of citizens, as it is imposed only in three districts of Punjab.

These views were expressed by a large number of senior citizens, retired employees and pensioners, residing in New Garden Town, Muslim Town, Model Town and Gulberg, who while talking to The Nation on phone, have shown their strong resentment regarding the proposed luxury tax. They warned the government of a strong protest, besides moving to the court against this clear discrimination if government does not redress theirgrievances. They alleged that the govt, by imposing tax, has punished those areas which caused defeat of PML-N.The houses constructed before partition or homes erected some 60 years back in Model Town and other older localities cannot be considered as luxurious. The govt should exempt those houses which were build 50/60 years earlier, as only pensioners or retired citizens are residing there who are unable to even whitewash their old homes, how can they pay half a million rupees as a tax, they put the question.
Provincial finance department sources revealed that luxury tax has been imposed on houses which are located in ‘A’ category rating of the Excise Dept, which does not include Cantonment area, EME colony, Defence, Bahria Town and Jati Umra, as they are considered rural areas. In this way Bilawal House of 126 kanal, owned by President Asif Zardari and the residences of PM Nawaz Sharif and Punjab CM Shahbaz Sharif on thousands of kanals situated in Jati Umra do not fall in ‘A’ category luxury homes, hence exempted from tax.
A resident of New Garden Town told The Nation that he acquired the land for his home in 1960 when it was an agricultural land in just Rs60,000 and constructed a couple of rooms just free of cost if compared with cost of today. On request of anonymity, he said that at that time it was compulsory to construct home on more than 2/3 kanals due to unavailability of ACs and architectural requirements.
Javed Iqbal of Lahore Stock Exchange suggested the government to impose tax on those homes, which are built during this era of commercialism with the cost of tens of millions of rupees in all areas, instead of keeping any limit. He said that exemption for widows is appreciable this exemption should be extended for old citizens too, as they cannot afford to pay a huge amount in the form of tax. He criticized the budget makers for exempting several posh areas including Cant, Defence, EME Colony, Lake View and Bahria Town from luxury tax, as most of big and luxury homes are located in these areas. He also suggested the govt that cantonment authority should collect tax from its area if Punjab govt cannot collect levy due to legal hiccups.
LCCI SVP and Qaumi Tajir Ittehad president Irfan Iqbal Sheikh demanded the govt of imposing luxury tax also in Gujranwala and Sialkot where top exporters of the country reside in villas of acres. The whole Punjab should come in tax net in this regard.  Mian Ayaz Anwar, MD of the Zaitoon Group, said that business community in Pakistan held high expectations from Nawaz Sharif government and after 5 years of economic stagnation, the small & medium sized businesses were looking forward to an enabling environment for their businesses to grow and contribute towards Pakistan’s economy
However, the Finance Minister’s budget measures have been a huge setback to the small business owners. When no industry has given incentives how economic growth will be enhanced, he asked the authorities.
Discussing the capital gains tax by the Punjab government, he pointed out that it will hinder the construction industry growth as the investment will drain out from this sector after imposition of capital gains tax.
Though the govt imposed this tax to encourage construction and to control artificial hike of property rates but real estate expert says that investors do not deposit their money in banks and invest in real estate sector to earn profit. Usually a small and medium sized developer acquire land and built unit with in nine-month period and tries to sale it as early as possible to earn profit on his investment. He cannot hold his investment and he will sale his constructed unit even he has to pay 5pc tax. Due to drop in profit margin a large number of investors will leave the sector and move to other fields in pursuit of better margin. When investment is decreases the construction industry will automatically will be affected negatively, he added.
Tayyib Khalil, a real estate expert and CEO of Property Express observed that there is no mention of covered area in tax rules and if covered area is very small as usually happens old homes, there should be no luxury tax, as homes with small covered area cannot be called luxurious one.
When contacted, Raja Ashfaq Sarwar, provincial minister and general secretary of PML-N Punjab, he said that govt is receiving several complaints in this regard and the issue has been discussed in a couple of meetings. He said that widows home of more than two kanals are already exempted and admitted that senior citizens should also be exempted from this levy. He was hopeful that the issue of luxury tax in few areas will be taken up with CM Shahbaz Sharif and the tax may be withdrawn.

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