3. Introduction
3
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.
4. 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
4
Brief overview
of Tax
Structure
5. Tax Overview (cont.)
5
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
6. 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.)
6
Broad
Objectives to
levies taxes
7. 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
7
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
8. Pakistan Tax System
8
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.
9. Pakistan Tax System
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• To be a Modern, Progressive, Effective, Autonomous and Credible organization for
Optimizing Revenue by providing quality service and Promoting Compliance with tax
and related laws
Our Vision
• Enhance the capability of the tax system to collect due taxes through application of
modern 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)
10. 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
10
11. • 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 tax
administration
Lack of trust regarding tax
utilisation
Burdensome Tax Filing
Other
12. 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.
12
How to Improve Tax System
