If the Federal Board of Revenue is entrusted with authority to make property valuation rates across 16 cities of the country, an independent entity appointed by the Security and Exchange Commission of Pakistan will now decide how a project launched by a builder will progress. The new property evaluation rules will provide a new base for the collection of withholding and capital gains tax. The government has tried to regulate the real estate sector by bringing both sides of the business under its surveillance. The history of the country indicates that any attempt by the government to bring a change in any sector brought disaster for the economy. The policymakers in the government always look at one side of the situation and ignore the other. The government steps are apparently legal and morally correct to bring the undocumented and unregistered sectors of the economy into the tax net, but it has failed to understand its consequences on the other side of the business.
Earlier, former Prime Minister Zulfikar Ali Bhutto nationalized industries and schools in 1975 in good faith, not only to improve the living standard of the working class but also bring industrial and education revolution in the country. But it proved disaster for the economy. Industries lost their potentials and were held hostage to the red-tape and corruption by the government officials. A right step at wrong time will not serve any purpose. The government fully understands that Pakistan is in the list of the most corrupt countries in the world. In this situation, authorizing government departments to interfere in the private businesses will not only block local investment but will also send wrong signals to the foreign investors. If the government is serious in enhancing its revenues, it should have to facilitate the private sector and stay away from interference in economic variables. The current move of the government is a right step, but at wrong time and it will bring adverse effects on the economy at the long run.
The Association of Builders and Developers has already rejected the government idea and has threatened to stop work across the country. The construction industry is the engine of growth and any harm to it will harm the entire economic process. The Security and Exchange Commission of Pakistan has zero experience in the construction industry and any misadventure by the government will only increase the woes of not only the business community, but also general public. Therefore, sooner the government reverses its decision the better.
