Topic

TAXATION IN PAKISTAN

Presented by:

Azfar Javed

1

Contents

Introduction

Tax Overview

Statistics Comparison within Region

• Pakistan

• India

• Bangladesh

Pakistan Tax System

Mind-set of General Public

Areas of Improvement

How to Improve Tax System

Conclusion

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Introduction

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What is Tax????

Death & Tax are CERTAIN !!! Sir Masood Pervaiz

Taxation is defined in many ways, common definitions are as under:

• It is a means for the government in increasing its revenue under the

authority of the law, purposely used to promote welfare and protection of

its citizens.

• It is the collection of the share of individual and organizational income by a

government under the authority of the law.

Structure of Taxes

Proportional Tax

•A proportional tax is also called a flat tax.

•Same percentage of income from all taxpayers, regardless of their earnings.

Regressive Tax

•Larger percentage from a person’s low-income than from another person’s high-income.

Progressive Tax

•A rich man should pay more than a poor man.

•a larger percentage from high-income earners than it does from low-income earners.

Tax Overview

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Brief overview of Tax

Structure

Tax Overview (cont.)

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Broad Categories of Taxes in Pakistan

Federal Taxes in Pakistan are classified into two broad categories,

viz., direct and indirect taxes.

DIRECT TAXES

Income Tax

INDIRECT TAXES

Custom Duty

Federal Excise Duty

Sales Tax

The government levies taxes in order to

achieve following objectives:

1. For collection of revenue to run and

administer the Government;

2. To use as a tool for implementation of

its policies; and

3. For fair distribution of wealth.

Tax Overview (cont.)

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Broad Objectives to levies taxes

Pakistan (1) India (2) Bangladesh (3)

(Rs. In Million) % age

Converted to

(Rs. In Million) % age

Converted to

(Rs. In Million) % age

Tax Revenue (A + B) 2,910,180 40,756,954 2,207,510

A. FBR Taxes 2,605,000 100% 35,709,924 100% 1,900,850 100%

Direct Taxes 1,109,000 43% 11,944,866 33% 1,824,530 96%

Indirect Taxes 1,496,000 57% 23,765,057 67% 76,320 4%

B. Other Taxes 305,180 5,047,030 306,660

Statistics Comparison within Region

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Net Revenue Receipts

(2014-2015)

Data Source:

1. All budget books including the Budget in Brief will be uploaded on the website of the Ministry of Finance: www.finance.gov.pk

2. Indian Public Finance Statistics (2014-2015) Ministry of Finance Department of Economic Affairs Economic Division

3. Asset & Investment Management Services of Bangladesh Limited web: http://www.aims-bangladesh.com

Pakistan Tax System

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In Pakistan, Federal Government is empowered to levy and collect tax on the

income of a person.

The Central Board of Revenue (CBR) was created on April 01, 1924, By the

enactment of FBR Act 2007 in July 2007 the Central Board of Revenue has now

become Federal Board of Revenue

In the existing setup, the Chairman, FBR, being the executive head of the Board

as well as Secretary of the Revenue Division has the responsibility for

i. Formulation and administration of fiscal policies,

ii. Levy and collection of federal taxes and

iii. Quasi-judicial function of hearing of appeals.

Pakistan Tax System

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• To be a Modern, Progressive, Effective, Autonomous and Credible organization forOptimizing Revenue by providing quality service and Promoting Compliance with taxand related laws

Our Vision

• Enhance the capability of the tax system to collect due taxes through application ofmodern techniques, providing taxpayer assistance and by creating a motivated,satisfied, dedicated and professional workforce

Our Mission

• Integrity

• Professionalism

• Teamwork

• Courtesy

• Fairness

• Transparency

• Responsiveness

Our Values

Federal Board of Revenue (FBR)

Following responses from public adequate to indicate their perception:

• Whatever money is collected is looted by rulers are spent on unnecessary

luxuries of the powerful classes of Pakistan.

• “Government wastes our money. If people believed their money will be used

for health, education, infrastructure, etc., 90% will pay.”

• “I do not see good use of money in any case. The state is not fulfilling its

contract of protecting life, property, and health. So why should we fulfil our

contract?”

• “If bigger sharks do not pay taxes and get away with it then why should the

middle-class pay?”

• Focus on Indirect Tax rather Direct Tax (its effects our businesses)

• Government unable to Control Corruption or change the Bureaucratic Mind-set

• “It is cheaper to evade taxes than to pay them.”

Mind-set of General Public

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• Pakistan is a country where tax avoidance is high, and only a limited number

of people / organisations pay tax.

• Why we do not pay taxes

• Lack of tax culture or tax education is the next most important cause of

corruption in the private sector

• Issuance of exemption certificates

Areas of Improvement

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18%

51%

20%

2%

9%

0% 10% 20% 30% 40% 50% 60%

Declining real incomes

Corruption in taxadministration

Lack of trust regarding taxutilisation

Burdensome Tax Filing

Other

Following are some recommendation to improve Tax System resulting in change

of General Public Mind-set;

• Develop a system with key features of universal self assessment with taxpayer

education and customer service.

• Initiate education of taxpayers and withholding agents through a well-

integrated programme of media campaign, booklets and brochures.

• Simplify and standardise the process of issuance of exemption certificates.

• Avoid introducing tax amnesty schemes

• Create a healthy relationship amongst the three stakeholders in the taxation

system viz: GOP, FBR and taxpayers

• Government should Focus on Expenditures.

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How to Improve Tax System

Conclusion

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Conclusion

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Any Question???