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LECTURE NO: 1
GENERAL UNDERSTANDING OF TAXLiteral meanings --- Burden, strainFor example, Ramiz Raja in his commentary
used the phrase that “singles will not tax Pakistan”
General DefinitionIt is compulsory contribution of wealth
levied upon by the state, to meet the expenses incurred in providing common benefits to the residents.
STATUTARY DEFINITIONTax 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 FEETax 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 PolicyEconomic developmentRaising employment levelInfluencing consumption patternPrice stabilityProper distribution of income Removal of deficit in the Balance of Payment
postion
FISCAL POLICYInstruments of the PolicyGovernment ExpenditureTaxesDeficit FinancingSubsidiesTransfer Payments –like unemployment
AllowanceSources for Revenue generation-like internal
external borrowing, aids and grants.
CANONS OF TAXATION Presented by ADAM SMITH, the father of
EconomicsSimplicityConvenienceCertaintyJudicious (fair play)Capacity to payBenefit principleBusiness friendly
TYPES OF TAXESDirect 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 TAXESProportional 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 TAXESRegressive Tax A tax that takes a larger
%age of income of low-income people than larger-income people.
Value Added Tax A tax levied at each stage
of value addition. For example, Sales tax.
TAXATION STRUCTURE OF PAKISTAN
Federal Taxes Provincial Taxes
Income TaxCorporate Tax Customs DutiesSales TaxCapital value Tax Excise Duties
Stamps DutyRegistration TaxMotor Vehicle Tax
TAXATION MANAGEMENTTaxation 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 of business to merger, amalgamation, winding up of the business
BUDGETThe word budget is derived from French
word “Bougette” means little bag or purse“Budget is estimation of revenues and
expenditures for specified future period”
BUDGETA 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 PAKISTANPrepared by Central Finance MinistryPresented to the National Assembly, by
the Finance Minister in the month of May or June
Discussed by the AssemblyPassed by the Assembly in original or
amended formFinancial 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 SECTIONSNon-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 EXPENDITURENon-Development Expenditure areDebt servicesDefenseCivil administrationLaw and orderSubsidesBeneficent departments such as education,
health, fisheries, forests etc.
HEADS OF EXPENDITURE--continuedGrants to provinces and Azad KashmirOther expenses like parks, sports, national
assembly etc.
DEVELOPMENT EXPENITURESRoadsCanalsDamsBridgesEducational and health facilitiesAgricultural and industrial development
SOURCES OF REVENUESTaxesFees and finesPrices for services (like use of railway
service, telephone etc)Grants and giftsSale proceeds of government propertyLocal taxes (toll tax, octroi charges, property
tax)
NON-TAX RECEIPTSInterest on loanThrough trading of government organizationFee like passport, post, telephone etcLicense fee and finesReceipts from State BankCurrency and coins
SOURCESEXTERNAL SOURCESLoansAidINTERNAL SOURCESLoansServicesBusinessTaxes
TAXES IN PAKISTANFEDERAL TAXESPROVINCIAL TAXESTAXES OF LOCAL AUTHORITIESZAKAT AND USHER
IMPORTANCE OF INCOME TAX
It is direct taxCombats inflationInfluence the rate of economic growthEncourage full employment Favours the small businessReduces the inequalities of incomeSocial reforms are possiblePervasive influence on all types of
business decisions
B.ADMN 610: TAXATION MANAGEMENTCOURSE INSTRUCTOR:SHAHID MAHMOODOBJECTIVESOverall view of the economic structure of
PakistanSalient features of Federal, Provincial and
Local taxation lawsUnderstanding 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.
OBJECTIVES--continuedAvailing the exemptions under the lawsTaxation planning of business
organizationsCOURSE CONTENTSLaws and practice of Income Tax in
Pakistan, Sales tax, Central excise, Provincial taxes and Local taxes
Working of the above legislationsPractical problems
BOOKS RECOMMENDEDTAX LAWS OF PAKISTAN (as amended 2010)
BY HUZAIMA & IKRAMCOMPLETE INCOME TAX LAW BY
S.A.SALAMSYNOPSIS OF TAXES IN PAKISTAN BY
MIRZA MUNAWAR HUSSAININCOME TAX LAW BY
PROF. DR. KHAWAJA AMJAD SAEED
MAGAZINESPAKISTAN TAX AND CORPORATE LAWS (LAHORE)TAXATION (LAHORE)TAX OBSERVER (KARACHI)TAXATION FORUM (LAHORE)
VISIT:www.finance.gov.pk
GENERAL KNOWLEDGE5 AGENCIES OF WORLD BANK