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Contemporary Taxiation
Group Members:
• Azam Khan
• Nabeel Khan
• Ghani Khan
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2.
Toipic
 Tax Reforms in Pakistan (1990-
2010)
Saeed Ahmed & Saeed Ahmed Sheikh
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Abstract
 Tax system in PK is consider to be;
 Complex
 Inelastic
 Non-neutral
 Inefficient
 The purpose of this paper is to provide an overview
of the tax reforms that have been implemented over
the past 2 dedecates in PK.
 Our study finds that the expectations of increasing
public revenue improving tax structure and
promoting tax culture in PK largely remained unmet. 3

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1. Introduction
 Government need revenue meet the spending needs
to maintain and adequate level of investment & more
effective public services.
(Ahmed & Stern, 1991)
 Taxes are main source of raising revenue in
developed as well as developing countries.
 Tax policies are the main differ between richer &
poor countries;
 Richer countries rely on board base income & make
little use of tariffs as source of revenue
 Poor countries rely on much less use of board base
taxes & rely on excise taxes & tariffs. Corrouption are
more common.
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5.
Contt.
 The factors commonly identified in developing
countries tax system are;
 Insufficient staff with skills
 Lack of up to date equipment
 Complex tax laws
 Poor enforcement of penalties for tax & corruption
 Poor information collection & identification of tax
payers
(Bird, 1989)
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6.
Contt.
 PK is one of the developing countiries with
very low tax to GDP ratio;
 This is mainly attributable to;
 Inelastic tax system
 Complex tax laws
 Complex network of exemptions & tax incentibes
 Week tax administration & mobolization of provincial
taxes
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2. Tax Reforms in Pakistan
 A National tax reforms commission was set
up in 1985 by the Government of PK to
present the recomendations for improving the
taxation systen in PK. The commission
submitted its final report in december 1986.
The brief summary of the recomendations
made by the commision with respect to direct
taxes, indirect taxes & administrative reforms
is presented below;
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2.1. Direct Taxes
 Direct taxes include the personal income tax, corporate
income tax, & wealth tax.
 Some recomendation of commision on direct taxes are as
follow;
 No interference be made in personal income tax
 Basic rate of tax for private companies should be reduce from 55% to
45%
 existing patterns of exclusion well tax base should be reviewd so as to
remove the existing anomalies
 Existing pattern of tax incentives should also be reviewd
 Salaried persons be required to file the standard return of total income
 Small retailers with annual turnover exceeding Rs. 3500000 be made
subject to an annual tax of Rs. 600
 Tax payers maintaining regular book of account for there busnisses
 Accounting records of the income tax department should be
computerized 8

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2.1 Contt.
 Tax evaders may be isolated & subjected to social
rejection by debarring them from holding social &
political positions
 Information network be strengthened & the
administrative set up for utilization of information
collected from various sources be streamlined.
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2.2 Indirect Taxes
 Major indirect taxes in PK included custom
duties, the sales taxes & central excise duty.
 The recommendations of the National taxation
reform commison with respect to indirect
taxes are as follow;
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2.2.1 Custom Taxes
 Custom duties should not be used as the principal source
of revenue generation.
 The base of custom tariff should be broadened & there
should be no duty exempt items at all.
 Reliance on customs tariff as tool to provide fiscal
incentives should be reduced.
 The rates of duties should be kept as low as possible
because high tariff is responsible for including
smuggling & under-inviocing.
 There should be a thorough re-examination of the
standard rates of rebate & issue of notification in
individual cases should be stopped.
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2.2.2 Sales Taxes
 Role of revenue generation should be
assigned to the sales tax which should emerge
as a major revenue generation tax.
 Sales tax should be levied across the board on
all the improted goods & domestic production
other than agriculture produce & unprocessed
food.
 Standard rates of adjustment for different raw
materials may be prescribed.
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2.2.3 Central Excise Duty
 The system of self-clearence should be extended to
industrial units at present under the supervised system.
 Proper safe-guards such as prescribing detailed
accounts for raw materials & other items (electricity,
gas, water, wages, social welfare contributions)
involved in the process of manufacturing should be
provided.
 Surprise checks may continue to be conducted but by
senior officers.
 Penalties in the event of violation of rules shall have to
be defaulters prosecuted. 13

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2.3 Administrative Structure
With respect to administrative structure the Nationa Taxation
Reform Commission made the following recommendations in its
final report.
 Establishment of Departmental ombudsman.
 Creation of Juditial Tribunal for indirect taxes.
 A new revenue division should be created. Revenue division will
have economic administrators & research scholars working around
the year in evolving a comprehensive taxation policy.
 The existing reward scheme for taxation officials should be made
more effictive.
 The possibility of improving the emoluments of the taxation
officials should be examined by the pay commission.
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