Difference Between currently and previous system of income tax and sale tax in Pakistan

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Final Project
On
“Taxation Management”
On the topic
“Difference Between currently and previous system of income tax and sale
tax in Pakistan”
Presented To:
“Sir Arif Hussain”
Presented By:
Muhammad Shaban MCE 12169
Mutahir Bilal MCE 12147
Nadia Izhar MCE 12170
Hina Anjum MCE 12112
Class M.Com
Semester 4th
Evening
Superior University
Lahore.

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Contents
Previous board name ……………………………………….. 3
Currently board name ……………………………………… 3
Previous structure of sale tax…………………………….. 3
Previous Appellate System ……………………………...... 4
Current setup of Administrative system …………………. 5
Current structure of sale tax ………………………………. 7
Current structure of income tax…………………………. 8
Problems ……………………………………………………... 10
Advantages……………………………………………………. 10
Disadvantages ……………………………………………….. 11
Suggestions ………………………………………………….. 11
Refinances ………………………………………………….. 13

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Previous & Current Administrative & Appellate System of Income Tax & Sales Tax:
Previous Name of Board:
The central board of revenue (CBR) was created on 1st
April, 1924 through enactment of the
Central Board of Revenue Act, 1924. The central board of revenue was the highest executive
authority of federal taxes (Custom, Income tax, Sales Tax, and Federal Excise) in Pakistan. In
1944, a full-fledged revenue division was created under the Ministry of Finance. In order to
remove impediments in the exercise of administrative powers of a secretary to the
government and effective formulation and implementation of fiscal policy measures, the
status of FBR as a revenue division was restored under the Ministry of Finance on October
22, 1991. However, the revenue division was abolished in January 1995, and FBR reverted to
the pre-1991 position. The revenue division continues to exist since from December 01,
1998.
Currently Name of Board:
In July 2007, the central board of revenue has now become federal board of revenue. In
previous years, the sales tax was working as a separate department and it used to collect tax
by its collectorates offices. In previous years collectorates officers use to entertain the sales
tax related issues in their specified jurisdiction.
Previous Structure of Sales Tax department:
Officers in Collectorate:
In sales tax previous setup, following officers use to work in collectorate.
Collector
Additional Collector
Deputy Collector
Assistant Collector
Superintendent
Deputy Superintendent
Auditor
Lower Staff

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Collectorate of Sales Tax in Pakistan:
Followings were the collector offices assigned to different collectors, divided by
territories.
Peshawar
Rawalpindi
Gujranwala
Faisalabad
Lahore
Multan
Karachi (East)
Karachi (West)
Hyderabad
Quetta
Mirpur ( AJ & K)
Department in Collectorate:
Followings were the department in collectorate.
Local registration Office (LRO)
Audit
Refund
Adjudication
Previous Appellate System:
Previous structure of sales tax:
In previous appellate structure, there was a collector appeals in income tax and custom,
excise and sales tax. In sales tax department collector appeals used to entertain all cases of
customs, sales tax and excise, where as in case of income tax appeals collector appeals used
to entertain all cases of income tax.
Custom, Excise and Sales Tax Appellate Tribunal:
In custom, excise and sales tax appellate tribunal federal government was the appointing
authorities who were eligible to appoint persons of Appellate Tribunals. Federal government
was liable to appoint chairperson of appellate tribunal.
There were two types of members in appellate tribunal:
Judicial Member
Technical Member

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Judicial Member:
Shall be a person who has been
A judge of high court
A district judge and is qualified to be a judge of high court
An advocate of high court and is qualified to be a judge of high court
Technical Member:
An officer of customs and excise group equivalent to that member FBR.
Current Setup of Administrative Structure:
In current setup, the FBR is regulating “Customs” and “Inland Revenue Services”
differently.
FBR
Customs
Inland Revenue
Services

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In Inland Revenue Services FBR is regulating Income Tax, Sales Tax and Federal Excise.
In past years there were problem that usually employees of income tax were working only in
few months but taking salary of whole years but they use to sit idle in those months where
there was no filling of income tax returns. Therefore, FBR decided to give income tax, sales
tax and federal excise under one roof. Now RTOS and commissioner RTOS is dealing with
Inland Revenue Services.
Large Taxpayer Unit (LTU):
Karachi
Lahore
Islamabad
Regional Tax Office (RTO):
Peshawar
Abbotabad
Rawalpindi
Sialkot
Gujranwala
RTO-I Lahore
RTO-II Lahore
Sargodha
Faisalabad
Multan
Bahawalpur
Inland
Revenue
Services
Income
Tax
Sale
Tax
Federal
Excise

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Karachi
Hyderabad
Sukkar
Quetta
Islamabad
Current Appellate structure system of sale tax:
In current set up commissioner of appeals, entertain all the appeals of income tax sale tax
and federal excise. All appeals are to be made to commissioner appeals. Chairperson judicial
member and accountant member can also hear the appeals.
Previous Structure of Income Tax department:
Previous structure of Income Tax Tribunal:
In income tax tribunal, there were two types of members:
Accountant Member
Judicial Member
These members were appointing by federal government of Pakistan including the
chairperson. It was mandatory that the accountant member shall be equal in rank of a
regional commissioner or it may be a commissioner of income tax with at least of 5 years
experience. Where as in case of judicial member the member must exercise the powers of
district judge or must be qualified as a judge of high court.
Income Tax Regions in Pakistan:
In previous setup, income tax was divided into 5 regions, which are as followed.
Islamabad - Northern
Lahore - Eastern
Multan - Central
Karachi – Southern
Karachi – Corporate
Offices of Income Tax:
There were different offices of income tax such as.
Regional Commissioner Office
Zonal Office (Commissioner)
Range (Additional Commissioner)
Circle

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Officers of Income Tax:
Officers of Income Tax as followed.
Regional Commissioner
Commissioner
Additional Commissioner
Deputy Commissioner
Assistant Commissioner
Income Tax Officer
Special Officer
Inspector
Lower Staff
Current Structure of Income Tax department:
Appellate structure:
In current set up commissioner of appeals, entertain all the appeals of income tax sale tax
and federal excise. All appeals are to be made to commissioner appeals. Chairperson judicial
member and accountant member can also hear the appeals.
FBR
LTU
Director general
Aduit
Research
HRM
Info proccesing
Legal
Enforcement
Tax payer facilties
RTO
Director general
Aduit
Legal
Enforcement and collection
Taxpayer facillties in division
Info facilties

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Chairman FBR
Member police direct tax Member police indirect tax
Member domestics operation
(south)
Member (facilities and taxpayer
education)
Member enforcement and
accounting
Member (taxpayer audit)
Member custom (operation)
Member domestics operation
(south)
Member (strategic
planning, research, and statistics) Member (legal)
Member (facilities and taxpayer
education) Member police direct tax
Director general (management
information system)
Member (administration)
DIirector general (intellgance and
investgation)
Director general HRM
B
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A
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M
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M
B
E
R
S
D
I
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C
T
O
R
S

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Practical Problems & Hurdles Discussed with Tax Authorities & Tax Advisors:
Problems in tax authority:
Tax collection is the biggest problem mentioned by the tax authority. Currently
according to the newspaper nawa-e-waqt 19 September, 2010. There are 7500
billion rupees of tax fraud in Pakistan.
Everybody in the country is raising the roof about his practice credential but hardly
anybody is prepared to pay his taxes. The tax culture in the country obvisoly needs
to be overhauled in a big way to get out of the present morass.
The type of issue that have during the course of the tax policy formation and
administration generally includes in sufficient revenue and fiscal imbalance
distortions in resource allocation inadequate equity feature of the tax system and
administration consultant.
A tax administration is doing frauds.
Tax consultant are also helping companies to prevent their tax and corporate are
also doing the fraud.
Advantages & Disadvantages of New System & Suggest the Best Administrative
System for Pakistan:
Advantages & disadvantages of new system:
Advantages of the new system:
There is more communication between taxpayers and tax authorities.
The new system in tax brought electronic filling into being which is increasing the
efficiency.
Member facilitation and taxpayer education is also a project of this new system,
which is helping in tax generation.
The administrative structure is help full with a crystal clear hierarchy this has made
clear communications.
RTO’s are working much better than the previous system and RTO’s are improving
their area tax collections.
Under one-commissioner appeals, tax appeals have become easy.
Under this new system direct tax and indirect calculation and filling has made easy
for the payers.
If an organization is paying more indirect tax the more direct tax the owner will pay,
so under this new system it is made easy to calculate the direct tax of the company.

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Disadvantages:
A person who has been working under the sales tax department now working under
sales tax department or excises this is not good.
Under a roof, system is increasing the chances of tax frauds.
This tax system failed to work on this tax policy, widening the tax base by reducing
exemptions, incentives and concessions.
Only few people are enjoying the ultimate authorities, there negligence can cause
this tax system suffer loss.
Pakistan’s tribal areas have not, traditionally, come under more than nominal control
of the central government, so the control of newer tax system is poor at those areas.
Choose people wisely while giving them authorities, in tax department majority of
the people are not graduates they are working there just on the basis of year of
experiences. They must be educated.
Career progression is slow for both officers as well as non-officers.
The non-availability of reliable statistics from the business makes it even more
difficult for tax administration to assess the potential taxes that need to be collected.
Income tax officers who deals income tax record now deals all department whether
sale tax custom and federal excise for this reason income tax officers feels burden in
their field.
Suggestions in tax authority:
Develop a system with key features of universal self assessment with selective audit,
centralized information system, survey and research capability, functional
specialization, taxpayer education and customer service.
A simple measure that could boost direct tax collect would be to link it to assets and
expenditure.
This tax system lack policy generation, there should be new polices to increase direct
taxies.
The major problem is the dreadfully low rate of direct tax collected as compared to
the indirect tax such as GST custom duties excise etc indirect taxies are burden on
loses well-off they harm business and competitiveness and are dislike almost
universally by economist.
To reduce pressure on adjudication, short filing, late filing, and non filing should send
directly to recovery.
The tax reform policy may be design around the key principles of:
Primary objectives to be rising of revenues, secondary objectives minimized.
Taxes are fair, progressive and equitable.
Income to be taxed is documented.

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There should be creation of databases of sales volume and income of different
entities.
Wealth tax should be restored.
While designing the tax policy directions, broadening of the tax base must be given high
priority so as to reduce reliance on relatively high tax rates to generate revenues. Within
base broadening, the use of ‘tax expenditures’ (tax preferences and exemptions to promote
specific economic and social objectives) should in general be reduced. Pakistani government
needs to do is to keep the rates of taxes low, number of taxes reduced, and the tax net
broad-based. The rate structure should be rationalized. In addition, tax reform should aim at
lowering the burden on the poor. Pakistan is, therefore, following the short run policy of
improving its revenue collection even through what can be termed as the distortionary
instruments such as expanding withholding and presumptive taxes. Simultaneously, efforts
are there to develop a comprehensive database, improve administrative skills and work
towards fully documented economy to widen the tax base and ultimately achieve the
desired level of equity in tax matters. There is an increased emphasis on training of
personnel and providing adequate physical infrastructure. The process of simplifying tax
laws and procedures continues. Rewards schemes for unearthing tax concealments are
being reviewed and made more liberal.

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References:
www.cbr.gov.pk
www.scribd.com
Lahore FBR Office