It has been reported that one-time flood tax is under consideration on urban property and agricultural land, not affected by flood. In big cities like Karachi and Hyderabad, there could be a cess of Rs 100,000 on a plot of 1,000 square yards and Rs 50,000 on 500 square yards.
Sources said that if 'flood tax' is imposed on specific size of big properties to generate additional revenue, it could be discriminatory. The small and medium size properties may not be subject to 'flood tax.' This would result in discrimination between those liable to pay this tax and those not covered under the 'flood tax' regime. The discrimination may occur when some sizes of plots are exempted from the 'flood tax' but it is imposed on certain sizes of properties.
According to sources, such kind of discrimination could be challenged in the courts on the basis of argument of violation of the Constitution. The official said that best tax administrations have never used fixed amount of tax on different sizes of houses/flats etc as a tool to generate revenue. Within the taxation regime, it is not the appropriate way to tax property. The tax is always imposed on the basis of earned income, but not only on the basis of ownership of property.
Tax experts were of the view that there might be cases where people are living in big size properties, but do not have the capacity to pay the one-time 'flood tax'. For example, the owner might have obtained property in the form of gift, or inherited. In other cases, retired government officials and widows might be living in big houses, but they do not have the capacity to pay the one lakh or above as fixed tax.
The fixed amount of 'flood tax' does not distinguish between those who having the capacity to pay as compared to those not having the capacity to pay the levy. There could be situations where property has been inherited but the owner is unable to pay fixed amount of 'flood tax'. It has been observed that usually self-occupied persons are not paying taxes due to their limited resources, experts said.
Practically it is not possible for the people to immediately pay a fixed amount of such tax on property without a specific deadline. When people have to pay property tax, they are mentally prepared to pay an amount by a deadline of June every year. However, it is not possible to suddenly announce imposition of such tax without giving some deadline to the owners of property. Secondly, the government might not be able to generate any huge amount from the 'flood tax' on big properties in view of meagre amount of provincial collection of property tax.
They observed that tax has always been imposed on income where there is capacity to pay the tax. In case of such kind of fixed amount of flood tax, it is difficult to determine whether the person has actually the capacity to pay the flood tax. How the government would compulsorily collect 'flood tax' from those owners of property who do not have the capacity to pay?, tax experts raised the question.
The owners of property are already paying property tax based on the size of property. The higher amount of property tax is applicable on big size properties as compared to low amount of property tax on small size properties. Referring to luxury tax, experts said that the provincial government of Punjab had imposed a luxury tax on vehicles in the past.
However, the luxury tax was challenged in the Lahore High Court. When asked about government mechanism to collect information about owners of property, tax experts added that the information could be collected from National Database and Registration Authority (Nadra) for collecting data of owners of property for levying such tax, if required.