FINAL PRESENTATION ON TAXES, TYPES OF TAXES, TAXATION POLICY, DEFICIT BUDGET Ali Hassan Fahad Iqbal Waseem Adnan Group Members A fee charged ("levied") by a government on a product, income, or activity. A tax may be defined as a "pecuniary/financial burden laid upon individuals or property owners to support the government. Tax Fiscal structure in Pakistan is divided between the Federal and the Provincial Governments. This structure was derived from the revenue-sharing provisions of the Government of India Act 1935 and has been incorporated into successive constitutional provisions delineating the respective revenue powers of the Federal and Provincial Governments. Under the present 1973 constitution, Federal and Provincial Governments are assigned separate revenue jurisdictions. The Federal Government has the constitutional right to levy a wide range of direct taxes. History Progressive A progressive tax is a tax imposed so that the effective tax rate increases as the amount to which the rate is applied increases. Regressive The opposite of a progressive tax is a regressive tax, where the effective tax rate decreases as the amount to which the rate is applied increases. This effect is commonly produced where means testing is used to withdraw tax allowances or state benefits. CLASSIFICATION OF TAXES Proportional In between is a proportional tax, where the effective tax rate is fixed, while the amount to which the rate is applied increases. Lump-sum A lump-sum tax is a tax that is a fixed amount, no matter the change in circumstance of the taxed entity. Equality Tax payments should be proportional to income Certainty Tax liabilities should be clear and certain Convenience of payment Taxes should be collected at a time and in a manner convenient for taxpayer Economy of collection Taxes should not be expensive to collect and should not discourage business. Canon of Taxation The Central Board of Revenue (CBR) was created on April 01, 1924 through enactment of the Federal Board of Revenue Act, In 1944, a full-fledged Revenue Division was created under the Ministry of Finance. After independence, this arrangement continued up to 31st August 1960 when on the recommendations of the Administrative Re- organization Committee, CBR was made an attached department of the Ministry of Finance. The status of CBR as a Revenue Division was restored under the Ministry of Finance on October 22, The Revenue Division was abolished in January 1995, and CBR reverted back to the pre-1991 position. The Revenue Division continues to exist since from December 01, TAX Collection Authority of Pakistan Formulation and administration of fiscal policies. Levy and collection of federal taxes. Quasi-judicial function of hearing of appeals. Functions of FBR Most of the taxation systems in the world are classified into two broad categories, viz., direct and indirect taxes. Fiscal structure in Pakistan is divided between the Federal and the Provincial Governments. This structure was derived from the revenue-sharing provisions of the Government of India Act It has been incorporated into successive constitutional provisions delineating the respective revenue powers of the Federal and Provincial Governments. Pakistan Taxation System Direct Taxes If tax is levied directly on personal or corporate income. Salaries Interest on securities; Income from property; Income from business or professions Capital gains Income from other source. Federal Taxes Indirect Taxes If tax is levied on the price of a good or service. Custom Taxes Sales Taxes Federal Excise Duty( removed through SRO in current year ) Others Continued Provisional Taxes Professional Tax Property Tax Vehicle Tax Provincial Excise Duty Stamp Duty Capital Gain Tax Punjab Airport Tax Karachi Dock Labor Board Cess Entertainment Tax Cotton Fees Betterment Tax Provincial Excise Duty Social Security Contribution Land Revenue Tax Explosive License Fee Employee Old Age Benefit Contribution Provincial Education Cess Municipal Taxes Auction of vegetable markets and slaughter houses Property tax levied at 3- 4 percent if the value of transaction Water Tax Octroi consisting of import and export tax Licence fee from vendors and shop keepers Fee for advertisement boards Auction of bus-stops and stands for other vehicles Fee for approval of constraction maps The Government of Pakistan has so far signed agreements to avoid double taxation with 39 countries including almost all the developed countries of the world. Such as: USA UK South Korea Japan UAE China Agreement for avoidance of double taxation Simplicity Equality Equity and fairness Convenience of payment Taxation Policy Revenue generated through taxes by Pakistan for last decades The amount by which government expenditure exceeds income in any one fiscal year. Deficit Budget According to inside reports of international monetary fund, the total federal and provincial budget deficit for is estimated to be Rs 950 billion, or 5.3 percent of GDP. Deficit Budget of Pakistan Pakistan reported a government budget deficit equivalent to 6.30 percent of the (GDP) in Government Budget is an itemized accounting of the payments received by government and the payments made by government. Debt-to-GDP ratio, is the amount of national debt a country has in percentage of its Gross Domestic Product. The debt to GDP ratio has climbed to 55 percent (2011 budget) P AKISTAN G OVERNMENT B UDGET An effective tax system will have good compliance levels. Tax system must have in- built mechanisms for taxpayer facilitation. Tax system should have a low level of litigation. Good Tax System for Pakistan should be