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Pakistan’s real estate sector is bracing for a major shift as the federal government considers a sharp increase in the Capital Gains Tax (CGT) on property sales. Sources say the government is weighing a proposal to raise the current 15% CGT rate to as high as 40% in the upcoming federal budget.
Officials familiar with the matter say the move aims to align the CGT rate with the corporate income tax rate. The idea is to close a revenue gap created by what the government sees as under-taxed profits in the booming property market. The government believes that bringing CGT in line with corporate taxes would ensure fairer taxation and help plug revenue leakages.
But news of the proposed tax hike is already causing concern across the real estate industry. Experts warn that such a steep increase could slow down property transactions. Sellers might hold off on listing their properties due to the higher tax burden, while buyers could face inflated costs, dampening overall market activity. A slowdown in the property market, in turn, could have broader consequences for the economy.
Sources in the Federal Board of Revenue (FBR) have confirmed that discussions with the International Monetary Fund (IMF) are ongoing, focusing on ways to boost revenue and manage public spending. These talks are part of wider efforts to strengthen the country’s fiscal position ahead of the new financial year.
Initial budget estimates show the government’s tax-to-GDP ratio is expected to remain at around 11%, while total public spending is projected to reach 20.3% of GDP. Both the Ministry of Finance and the FBR are in close consultation with the IMF to finalize these key economic targets.
While the government sees the CGT hike as a necessary step toward a more balanced and equitable tax system, stakeholders in the real estate market are watching developments closely. The final decision—expected in the coming weeks—could significantly impact Pakistan’s property market and the broader economy.
