Policy Incoherence? Finance Act 2025 Criticized for Double Standards in Economic Documentation Drive

The Government’s stated commitment to promoting documentation and transparency through the Finance Act, 2025 is being called into question, as experts and industry stakeholders point to glaring inconsistencies in its treatment of different types of economic transactions.

At the center of the controversy is Section 114C of the Income Tax Ordinance, 2001, introduced through the latest Finance Act. The provision allows ineligible persons (those not appearing on the Active Taxpayers List) to purchase immovable property valued below PKR 100 million, based on FBR-notified values. These values are widely known to be substantially lower than prevailing market rates, in some cases by 50% or more, effectively enabling the execution of transactions worth hundreds of millions of rupees without full regulatory scrutiny.

Real Estate Loophole Sparks Concern

Critics argue that this threshold creates a backdoor for undocumented wealth to be invested in real estate, a sector that historically lacks transparency and is already a known avenue for capital preservation rather than productive economic activity. The Rs. 100 million limit may sound like a safeguard, but when it is calculated on under-declared FBR rates, it permits massive real estate purchases to go unchecked.

This allowance stands in sharp contrast to rules applicable to other sectors. For instance, Section 21(s) of the same Ordinance disallows cash receipts exceeding Rs. 200,000 per invoice, even for businesses in sectors like manufacturing, logistics, or services, sectors that generate employment, contribute to exports, and produce tangible economic output.

Uneven Burden on Productive Sectors

Business leaders and tax consultants have criticized this policy divergence, questioning the logic of strict compliance for productive industries while leniency is extended to speculative and largely unproductive sectors like land acquisition. It is contradictory that small manufacturers or service providers are penalized for cash receipt in excess of 200,000, while non-filers are being allowed to invest in properties worth Rs. 100 million under FBR values.

This inconsistency undermines the Government’s broader reform agenda, which is supposedly focused on documenting the economy, broadening the tax base, and discouraging the use of cash in large transactions.

Stakeholders Call for Reforms

The policy has also raised concerns about enforcement challenges and stakeholder confusion. With different thresholds and standards applying to different economic activities, tax authorities may struggle to enforce the rules consistently.

Stakeholders are urging the Government to reconsider the Rs. 100 million threshold under Section 114C and align it with market realities and the principles of uniform taxation. They also call for rationalizing the compliance burden across sectors so that efforts to document the economy are not seen as punitive for productive enterprises while lenient toward non-compliant investment behavior.