We can’t afford further decline in our home remittances
LAHORE: Overseas Pakistanis have been investing in Pakistan’s real estate sector for a long time in order to realise their dreams of owning a home in their home country. There exists an anomaly in the withholding tax regime, which is disturbing for overseas Pakistanis because the rate of withholding tax has been doubled from two to four per cent on the purchase of property by non-filers in the 2016-17 budget. Overseas Pakistanis are mostly non-filers because they are non-residents and all their overseas earned income is exempt from any income tax in Pakistan.
Given this, the withholding tax regime is questionable as it is discouraging them from investing in property in Pakistan. When overseas Pakistanis are exempt under the law from filing an income tax return, why must they pay withholding tax for being non-filers at the time of purchasing property in Pakistan? There has to be a difference in the withholding tax regime between a non-filer overseas Pakistani and a non-filer resident Pakistani; the income tax law completely exempts the former whereas the latter is not exempt. Can the Federal Board of Revenue take notice of this serious anomaly and take the necessary steps to address it? Please don’t suggest that overseas Pakistan first pay a four per cent withholding tax at the time of buying property in Pakistan and claim a refund later on. That is cumbersome and almost impossible for overseas Pakistanis.
It is well-known that there is a strong link between overseas Pakistanis and the real estate business in the country. Home remittances plunged by 20 per cent in July 2016 compared with July 2015 because the real estate business was nearly closed for June and July 2016, due to enhanced taxes on property sales and purchases in the 2016-17 budget. We can’t afford further decline in our home remittances, which give tremendous support to the country’s balance of payments.
Ejaz Ahmad Magoon
Published in The Express Tribune, August 26th, 2016.
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