95% of Builders, Developers Failed to Comply With Tax Amnesty Conditions

Over 95% of builders and developers who availed Pakistan’s 2020 tax amnesty for the construction sector failed to comply with the scheme’s conditions, the Auditor General of Pakistan (AGP) has found. The findings were disclosed in a “Sectoral Audit of Taxation in Real Estate Sector,” which reviewed the impact of the construction package announced in April 2020. The package had offered incentives such as tax exemptions, reduced levies on construction materials, and immunity from past tax liabilities in a bid to revive the sector and boost economic activity. According to the Federal Board of Revenue (FBR), 993 builders and developers registered under Section 100D of the Income Tax Ordinance to benefit from the amnesty. However, auditors observed widespread non-compliance, leading to significant revenue losses. Nearly 57% of developers assessed by the Regional Tax Office (RTO) Islamabad were non-filers, underlining weak enforcement of tax return submissions. The report highlighted that all cases from Punjab and Khyber Pakhtunkhwa were initially clustered under RTO Islamabad, a move described as unwise. This centralization impaired monitoring and delayed tax recovery. To ease the burden, 3,702 of 11,243 cases were later reassigned to relevant tax offices, but frequent jurisdiction transfers further slowed assessments. The AGP also flagged loopholes in the Inland Revenue Information System (IRIS), where computerized payment receipts often lacked taxpayer details. These omissions allowed incorrect tax credit claims and encouraged benami transactions. The report recommended that the FBR tighten enforcement of laws against proxy property ownership to plug revenue leakages.