LAHORE: The Federal Tax Ombudsman (FTO) has detected major flaws in the valuation of immovable properties across Pakistan, revealing a lack of attention from the Federal Board of Revenue (FBR) and incompetence that has left the field vulnerable to the discretion of provincial and FBR’s field staff.
In an initiative undertaken on its own motion, the FTO initiated probe, emphasizing the need for a standardized approach to property valuation. The findings highlight the absence of a cohesive method, leading to inconsistencies and potential inaccuracies in the valuation process.
The FTO recommended a comprehensive set of methods for the valuation of immovable properties, urging the FBR to adopt approaches such as the comparable methods, cost-plus (replacement value), profit/income method, and the residual method. For properties consisting of plots or sites, the FTO emphasized the significance of estimating value through comparable vacant land sales or auction prices. Adjustments for constructed properties should be made, considering factors like location, property condition, amenities, security, developer credibility, brand reputation, and property size.
While acknowledging the flexibility of methods, the FTO stressed the need for a systematic valuation approach to introduce uniformity, consistency, and credibility to the FBR’s valuation tables.
The investigation further revealed the absence of any significant efforts by the FBR to develop a standardized method for valuation, and no standing anomaly committee exists at any level to address stakeholder concerns in cases of inconsistencies or incorrect valuations made by committees.
Additionally, the Directorate General of Immovable Property, established through the Finance Act of 2018, has remained non-functional since its inception, failing to contribute any value to the valuation process. The FTO recommended an immediate functionalization of this directorate, creating a suitable framework for the proper valuation of immovable properties.
To address the prevailing issues, the FTO urged the FBR to instruct the Member (Policy Wing) to develop Standard Operating Procedures (SOPs) containing appropriate valuation methods. Moreover, the FBR was advised to direct the Member (Policy) to establish a standing anomaly committee at appropriate levels to address stakeholder grievances regarding valuation matters.
In a move towards transparency and accuracy, the FTO proposed the hiring of competent and experienced valuers for the valuation of properties. This step, if implemented, is expected to bolster public trust and confidence in the property valuation system.
As Pakistan grapples with these identified shortcomings in the valuation of immovable properties, the onus is now on the FBR to implement the recommended reforms swiftly and efficiently, ensuring a fair and standardized approach to property valuation across the country.
