TAXATION MANAGEMENT

LECTURE NO: 1

GENERAL UNDERSTANDING OF TAX

Literal meanings --- Burden, strain
For example, Ramiz Raja in his commentary used the phrase that singles will not tax Pakistan General Definition It is compulsory contribution of wealth levied upon by the state, to meet the expenses incurred in providing common benefits to the residents.

STATUTARY DEFINITION
Tax means any tax imposed under chapter II and include a penalty, fee or other charge or any sum or amount leviable or payable under the Ordinance. TAX vs FEE Tax is compulsory levy and subject to general benefits, whereas, fee paid entitles a person to claim counter benefit.

WHAT IS FISCAL POLICY?

It is a discipline that deals with arrangements which are adopted by the government to collect the revenue and make the expenditures so that social and economic stability could be maintained.

WHAT IS FISCAL POLICY?

Objectives of Fiscal Policy
Economic development Raising employment level Influencing consumption pattern Price stability Proper distribution of income Removal of deficit in the Balance of Payment postion

FISCAL POLICY
Instruments of the Policy
Government Expenditure Taxes Deficit Financing Subsidies Transfer Payments like unemployment Allowance Sources for Revenue generation-like internal external borrowing, aids and grants.

CANONS OF TAXATION
Presented by ADAM SMITH, the father of Economics Simplicity Convenience Certainty Judicious (fair play) Capacity to pay Benefit principle Business friendly

TYPES OF TAXES
Direct Taxes
Incidence (burden) of tax on the same person, on whom it is levied. For example , Income tax

Indirect Taxes
Incidence of tax can be shifted by the person on whom levied to other person. For example, Sales tax

TYPES OF TAXES
Proportional Taxes
Levied with same %age. For example ,Sales tax is levied at 16% .

Progressive Taxes
Based on capacity to pay. The tax rates increases with increase in income.

TYPES OF TAXES
Regressive Tax

A tax that takes a larger %age of income of low-income people than largerincome people.
Value Added Tax A tax levied at each stage of value addition. For example, Sales tax.

TAXATION STRUCTURE OF PAKISTAN

Federal Taxes Income Tax Corporate Tax Customs Duties Sales Tax Capital value Tax Excise Duties Provincial Taxes Stamps Duty Registration Tax Motor Vehicle Tax

TAXATION MANAGEMENT
Taxation Management is a strategy for the business managers to make maximum use of tax holidays, exemptions, rebates, tax credits, deductible allowances available under the law and derive the benefit of minimum tax liabilities and tax payments. For better understanding of taxation structure, it is prerequisite to know the different business entities. Scope of taxation ranges from incorporation

BUDGET
The word budget is derived from French word Bougette means little bag or purse
Budget is estimation of revenues and expenditures for specified future period

BUDGET
A statement showing estimates of the revenues and payments position of a government for a particular financial year. It shows the direction of the polices of the government in power. Estimated revenues exceeds the estimated expenditure, the budget is called surplus budget, otherwise a deficit budget. If both the sides are equal then it is called balanced budget.

FEDERAL BUDGET OF PAKISTAN

Prepared by Central Finance Ministry Presented to the National Assembly, by the Finance Minister in the month of May or June Discussed by the Assembly Passed by the Assembly in original or amended form Financial year starts from 1st of July, the budget must be passed before this date. The original budget is called budget Estimates (BE)

THE TWO SECTIONS

a) Revenue or Non- developmental Budget
Revenue Budget (R.B) shows anticipated revenues from tax and non-tax sources for meeting the running expenses of the government on civil administration and defense. Surplus RB is transferred to the Capital Budget. Tax revenues includes income tax, sales tax, custom duties, central excise duty

THE TWO SECTIONS

Non-tax receipts include income from post office, telephone and telegraph, interest on loan, surcharges etc. b)Capital Budget. contains the proposed development expenditure during the year and estimates of receipts from loans, aid and surplus from the Revenue Budget Both types of the budgets are taken together give a good picture of the economic picture of the country.

HEADS OF EXPENDITURE
Non-Development Expenditure are Debt services Defense Civil administration Law and order Subsides Beneficent departments such as education, health, fisheries, forests etc.

HEADS OF EXPENDITURE--continued
Grants to provinces and Azad Kashmir Other expenses like parks, sports, national assembly etc.

DEVELOPMENT EXPENITURES
Roads Canals Dams Bridges Educational and health facilities Agricultural and industrial development

SOURCES OF REVENUES
Taxes Fees and fines Prices for services (like use of railway service, telephone etc) Grants and gifts Sale proceeds of government property Local taxes (toll tax, octroi charges, property tax)

NON-TAX RECEIPTS
Interest on loan Through trading of government organization Fee like passport, post, telephone etc License fee and fines Receipts from State Bank Currency and coins

SOURCES
EXTERNAL SOURCES Loans Aid INTERNAL SOURCES Loans Services Business Taxes

TAXES IN PAKISTAN
FEDERAL TAXES PROVINCIAL TAXES TAXES OF LOCAL AUTHORITIES ZAKAT AND USHER

IMPORTANCE OF INCOME TAX

It is direct tax Combats inflation Influence the rate of economic growth Encourage full employment Favours the small business Reduces the inequalities of income Social reforms are possible Pervasive influence on all types of business decisions

 COURSE INSTRUCTOR: SHAHID MAHMOOD OBJECTIVES Overall view of the economic structure of Pakistan Salient features of Federal, Provincial and Local taxation laws Understanding the application of the above legislation, especially with reference to definitions, Exemptions, Salary, Income from Property, Income from Business, Capital gain and Income from other sources.

B.ADMN 610: TAXATION MANAGEMENT

OBJECTIVES--continued
Availing the exemptions under the laws Taxation planning of business organizations COURSE CONTENTS Laws and practice of Income Tax in Pakistan, Sales tax, Central excise, Provincial taxes and Local taxes Working of the above legislations Practical problems

BOOKS RECOMMENDED
TAX LAWS OF PAKISTAN (as amended 2010) BY HUZAIMA & IKRAM COMPLETE INCOME TAX LAW BY S.A.SALAM SYNOPSIS OF TAXES IN PAKISTAN BY MIRZA MUNAWAR HUSSAIN INCOME TAX LAW BY PROF. DR. KHAWAJA AMJAD SAEED

MAGAZINES
PAKISTAN TAX AND CORPORATE LAWS (LAHORE) TAXATION (LAHORE) TAX OBSERVER (KARACHI) TAXATION FORUM (LAHORE)

VISIT:
www.finance.gov.pk

GENERAL KNOWLEDGE 5 AGENCIES OF WORLD BANK