Basics of Taxation and Ethics – Lecture Summary

Systems of Taxation in Pakistan Ch-1

Objectives of Non- Revenue Taxes as Basics of Principles for levy Structure of Characteristics of
Taxation Objectives Development Taxation of Tax Taxes Tax Laws
Tax exemptions The Benefit Regressive Tax Enforced
To meet govt. To run the Canons of
in tax free zones Principle Contribution
expenditures govt. Taxation
industry
Citizens Rich at higher Proportional Tax Payable in Cash
Implementation Ability to pay
protection and rate and poor at Equality
of policies principle
welfare lower rate
Collection of Fair High custom The equal Progressive Tax Proportional
Convenience
share of Distribution of duty on luxury distribution Principles
of payment
persons Wealth items principle
To strengthen Tax credits on Economy of Levied for pubic
sick industry donations collection
Tax credits on Levied by law
Protection of donations to making authority
Certainty
local industry educational
institution.
International Tax incentives Fiscal Adequacy
trade for agro industry
To counter Equality
inflation effects
Promotion of Administrative
science and Feasibility
inventions
Elimination of Consistent with
discriminations economic goals
Discouraging
certain
activities

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 Basics of Taxation and Ethics – Lecture Summary

Chapter -3

Legislators Administrators

Ethic
s

Tax Payers Practitioners

Ethics – Think about a Robot (Manufactured by Human) and Human (Created by God). Ethics of Taxation
System
Ethics and Canons of Taxation

 Compulsory Contribution
 Balance between Tex Payers and Tax Authorities

Canons

Equity Taxes should be proportional to income.

Certainty Time, amount and manners of tax should be cleared to tax payers
Convenience Mode, timing and payment should be convenient to tax payers. (e.g. Installments)
Economy Cost of tax collection should be lower than the amount of tax collected.
Productivity Fiscal Adequacy – revenue should meet the expenditures
Elasticity Increase or decrease in tax. (e.g. Finance Act can change law).
Simplicity Tax system should be simple (e.g. Dividend (FTR) @10% as final tax)
Diversity Tax from different sources (e.g. GST, I.Tax and FED etc.)

A- Ethics for Tax Legislators

a. Tax system should be in lined with Canons of Tax.
b. System should be discriminatory in any aspect. (tax imposed to opponents by the
politicians)
c. For collection of revenue to run and administer the Government;
d. To use as a tool for implementation of its fiscal policies; and
e. For fair distribution of wealth.
B- Ethics for Tax Administrators (FBR)
a. Powers:
i. Assessment of tax
ii. Collect Revenue

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 Basics of Taxation and Ethics – Lecture Summary

iii. Seize Property

iv. Attachment of bank account.
v. Legal action.
b. Mis-use of powers
i. Bribery
ii. Threat to tax payers
iii. Loss of property
iv. Imprisonment
c. Pillars

Pillar Explanation
Fairness Impartial from race, social or economic circumstances.
Transparency All proceeding against a person must be transparent.
Equity Objective shouldn’t be achieved in an irrational manners.
(Exemptions etc. should be in lined with inflation).
Accountability Wrong doers must be accountable.

d. Un-ethical issues
i. Gift from tax payers
ii. Bribery
iii. Conflict of interest
iv. Selective tax payers for audit
v. Political influence
vi. Leaking secrecy of tax payers
vii. Lack of freedom
viii. Threating the tax payers.
e. Principles for Structuring Discretions
i. Open Plans
ii. Open Policy Statements
iii. Open Rules
iv. Open Findings
v. Open Reasons
vi. Open Precedents
vii. Fair Procedures.
f. Ethics for Implementing Authorities
i. Open Plans
ii. Open Policy Statements
iii. Open Rules

C- Ethics for Implementing Authorities

i. Obey the law (undue exemption or credits etc.)
ii. Honest with government and taxpayers
iii. Impartial and fair dealing without any race or political issue
iv. Provision of quality services
v. Avoid to participate in political activities

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 Basics of Taxation and Ethics – Lecture Summary

vi. Maintenance of proper and accurate records

vii. Avoid gifting from the taxpayers
viii. Proper efforts to collect tax and increase tax base
ix. Refund of tax in time
x. Educate the taxpayer about its rights and responsibilities
xi. Confidentiality of information

D- ETHICS FOR TAX PRACTITIONERS

 Integrity
 Objectivity
 Professional competence and due care
 Confidentiality
 Professional behaviour

E- Ethics for Tax Payers

There are three approaches to ethics for tax compliance which are as under:

Utilitarianism, which tells us to aim for the greatest total happiness across the population. In the economic
sphere, we can interpret ‘happiness’ as the satisfaction of our desires; and so utilitarianism as aiming for
maximum satisfaction of desires.

Deontology, which bases ethics on the idea of duty.

Virtue ethics, which focus on the virtues we should have, and on what constitutes a virtuous life. A broad
conception of the virtues must be used here, encompassing not only virtues such as honesty, but also virtues
such as using one’s talents and leading a fulfilled life

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