Loss of revenue from property dealers
Many hundred million Afs tax on rent on houses are not collected. An investigation.
Last year, the Ministry of Finance (MoF) earned 800 million Afs from tax on rent of residential houses in Kabul city. The owner of the property pays the tax to the dealer who puts the house on rent. The dealer in turn hands it over to the ministry.
MoF has collected a separate 32 million Afs as income tax from property dealers in Kabul over one year. Together the ministry has collected 832 million Afs from property dealers.
The Ministry of Justice, which issues work permits, has over the years given it to 5,000 property dealers in Kabul. At the time of extension, each has paid 500,000 Afs as guarantee. The ministry says only 2,700 property dealers have extended their permits under the new law for property dealers which was implemented roughly a year ago.
The ministries of justice and finance both say that they are trying to identify the property dealers that have not extended their permits and carry out their activities illegally in Kabul city.
It is estimated that some 2,500-property dealers are working. Both ministries of justice and finance say that this group of property dealers are those that have not filed their annual income tax and tax collected on properties rented.
The total amount that the illegal property dealers are not paying to the government has been estimated as 825 million Afs. The Central Statistics Organisation (CSO) says 590,000 families were living in Kabul city in 2013 – while 67.2 percent were living in their own homes, 27.1 percent were living in rented units, 3.1 percent in mortgaged houses and 2.6 percent in free houses. At present, the total number of families in Kabul is roughly 600,000. The number of families living in rented accommodation would be 162,000.
Indifferent to paperwork
Habibullah Amin Andar heads the central zone of small taxpayers in MoF. He told Killid that property dealers have not been honest in reporting taxes in the last one year – they have not been filing regular reports.
For example, he says that the justice ministry has given each property dealer a register book to record their deals such as sale, rent and mortgage but the dealers either do not use the register book or make note of some deals in the book and ignore the rest.
This has created problems for both the justice and finance ministries, and a loss of income for the government. He added that the implementation of law of property dealers is the responsibility of the Ministry of Justice and the employees of MoF collect the tax from the property dealers that have permits to conduct their business.
Parwez Rostayee, the head of Property Dealers in the justice ministry, says that he is well aware of illegal activities of the property dealers in the Afghan capital. He says that based the new law of property dealers that was approved in December 2016 and was published in official gazette too, every one who is a property dealer has to pay 500,000 Afs as cash guarantee or hand over legal deed of a property like a house to the government to conduct business.
Till last week, 1,500 permits have been extended, and 300 already done. According to him, at least 2,000 dealers are clandestinely conducting business.
But sincere efforts to weed out the illegal are underway. "A joint delegation of the government has assessed the property dealers in the 15th District and has closed down the businesses of 40 property dealers who were operating illegally," he said.
Rostayee urged people to make sure that the property dealers they choose to deal with are registered.
Escaping the tax net
Where the owners of residential houses do not pay tax on rents, or pay only one year of tax, it means when the contract terminates, the house owner and the prospective tenant extend the contract without informing, or extending their contract in order to avoid tax.
Despite our repeated attempts to talk to MoF officials failed.
An owner of one of the property dealer shops located in Karte e Seh of Kabul city told the Killid that the employees of MoF were under scrutiny, and those who flouted the rules would be penalised. Violators faced the prospect of being made to pay heavy fines.
According to the owner of a property dealer-ship, flee from tax on rent of house would result 15 percent fine of whole rent within year.
Expensive to extend
On the basis of the new law, a property dealer has to get work permits to be eligible to conduct business. The owners of some of property dealers' shops say that considering the economic situation of people and country, most of the owners are not able to pay a big amount as guarantee so they have to carry out their activity illegally.
Haji Abdul Halim, owner of a property dealer shop located in Karte e Char of Kabul city, says that the price of rent of houses, mortgaging the houses as well as selling of residential houses has decreased by half – affecting their earnings – and as a result property agents are not able to afford the high fee for extension.