Govt to End 3% FED on Property Sales After IMF Nod

The federal government has decided to abolish the 3 percent Federal Excise Duty (FED) on the first sale of all properties. The decision was made in consultation with the International Monetary Fund (IMF). The duty, which also included 5 percent tax for non-filers, will be scrapped entirely, reported Express Tribune. A formal summary to initiate the legislative process has already been moved, and Finance Minister Muhammad Aurangzeb has approved the proposal. The government intends to abolish the tax by the end of April. The prime minister’s housing task force had recommended withdrawing the FED. Necessary legislation to formalize its abolition would be introduced soon. Pertinently, the FED was initially imposed on the first sale of all commercial and residential properties, including houses, plots, and apartments, at rates of 3 percent for filers, 5 percent for late filers, and 7 percent for non-filers. It was collected at the time of booking, allotment, or transfer. The IMF has yet to publicly endorse the reversal. The prime minister’s task force on housing also recommended abolishing the deemed income tax on properties. It further urged harmonizing stamp duties across jurisdictions, removing the capital value tax in Islamabad, and introducing exemptions for first-time homebuyers and low-cost housing projects. The task force also suggested that capital gains tax should return to a slab-based system and that taxes on construction materials be rationalized to reduce building costs. While the task force pushed for a reduction in the central bank’s policy rate to single digits to support real-estate growth, both the IMF and the State Bank of Pakistan rejected the proposal. The government is also considering abolishing the 10 percent income tax surcharge currently applied to individuals earning over Rs. 10 million annually.