Finance Committee Endorses Abolition of FED on First Property Purchase

Islamabad, June 16, 2025 — The Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, held its fourth consecutive meeting at Parliament House to review the Finance Bill 2025, including the Annual Budget Statement presented under Article 73 of the Constitution. The committee continued its deliberations with active participation from Finance Minister Muhammad Aurangzeb, senior lawmakers, and officials from the Federal Board of Revenue (FBR).

Opening the session, Chairman Mandviwalla commended Finance Minister Aurangzeb for his consistent engagement, calling it a reflection of the government’s dedication to transparency and responsible fiscal governance.

A focal point of the meeting was the clause concerning “Offences, Penalties, and Punishment on Tax Fraud.” Senator Farooq Hamid Naek proposed a series of legal amendments aimed at balancing deterrence with fairness. His recommendations included reducing penalties from Rs 10 million to Rs 5 million, limiting jail time from 10 years to 5 years, ensuring three notices before prosecution, mandating High Court resolution of tax appeals within 60 days, and separating the inquiry, investigation, and trial stages.

Senator Naek stressed that tax law should be fair and not be weaponized. Senator Shibli Faraz echoed these concerns, cautioning against political misuse of tax provisions.

The committee lauded Senator Naek for guiding members through the bill’s legal language and accepted many of his proposals, which will be communicated to the Prime Minister. “Implementation of these recommendations will make the real difference,” said Mandviwalla.

The committee also approved a new clause for stricter inspection of audit firms, citing FBR reports that many firms fall short of international standards. Chairman Mandviwalla criticized the sector, noting that only 10% of audits are conducted thoroughly. The revised legislation empowers the Audit Oversight Board, allows Chief Commissioners to refer cases, and requires prior notice for inspections.

Tensions arose over the FBR’s intention to outsource some auditing functions. While some senators supported the idea under controlled access to taxpayer data, others raised red flags about the risks to confidentiality. The committee agreed that auditors cannot be held liable when misled by fraudulent declarations from taxpayers.

Senator Anusha Rehman addressed the need to regulate e-commerce without disproportionately impacting unemployed individuals, especially youth and women. She proposed a Rs 2 crore threshold before mandatory registration applies to online platforms.

Regarding the proposed e-billing rollout, Senator Mohsin Aziz urged a phased approach, noting Malaysia’s gradual implementation. Chairman Mandviwalla invited both senators to submit detailed written proposals.

The committee also reviewed the phased introduction of GST in FATA and PATA, starting at 10% next fiscal year and rising to 18%. Senator Shibli Faraz questioned the real impact of past tax exemptions, demanding data on regional development, job creation, and investment.

Another critical session topic was the “Islamabad Capital Territory (Tax on Services) 2001” and compliance with IMF benchmarks. The committee recommended developing a negative list of services for improved tax clarity.

A major revelation came during discussions on the Public Finance Management Act, 2019. It was disclosed that Rs 43 billion remains in NADRA accounts and similar funds are held by other public institutions — all outside the central treasury. These funds include surplus profits, service charges, and property sale revenues. Senator Anusha Rehman condemned the practice, stating that “the government is borrowing its own money from banks while public institutions profit off the people.”

The committee ordered the Establishment Division and Ministry of Finance to submit full account details, investment records, profit statements, and the legal justification for withholding public funds from the treasury.

In a significant move, the committee approved the abolition of Federal Excise Duty (FED) on the first purchase of immovable property, marking a step toward easing property ownership for citizens.