1.Syed Mohammad Hassan REVIEW OF TAX REFORMS IN PAKISTAN

2. WHAT IS TAX According to Hugh Dalton, A tax is a compulsory contribution imposed by a public authority, irrespective of the exact amount of service rendered to the taxpayer in return. What is Tax ?[2010] Retrieved from 3. TYPES OF TAX Direct Tax The taxes that are levied on the income of individuals or organizations. Income tax Capital gains tax Property Tax Indirect Tax Taxes levied on goods or services and are ultimately paid by consumers in the form of higher prices. Sales tax Value added tax Excise duty Custom duty Direct and Indirect taxes[2013] Retrieved from< http://www.moneycontrol.com/news/advertising/defined-directindirect-taxes_822695.html> Types of Taxes[2011] Retrieved from< http://economics.about.com/od/taxes/a/Types-Of-Taxes.htm> 4. TAXATION IN PAKISTAN FBR is the authority for collection of Taxes. More than 70 unique taxes administered by at least 37 agencies . Classified into two broad categories Direct Taxes Indirect taxes Around 25 percent tax revenue is collected through direct taxes and 75 percent trough indirect taxes. The minimum penalty is PKR 500 and the maximum is 25% of the amount of tax payable. Types of Taxes[2011] Retrieved from< http://economics.about.com/od/taxes/a/Types-Of-Taxes.htm> Taxes in Pakistan[2010] Retrieved from< http://pakistaneconomy.wordpress.com/2010/01/16/taxes-in-pakistan> 5. TAXATION REFORMS IN PAKISTAN 6. Levied on the income of individuals or businesses. Income is classified into the following five heads; Salary Income from property Income from business Capital gains Income from other sources Corporate Income Tax rate is 35%. Tax rates for the salaried class are 0.5% to 25%. The limit not chargeable to tax is Rs. 350,000 or below. The standard rate of Sales Tax in Pakistan is 16%. Levied on the supply of goods and services. Following sectors are required to pay sales tax; Manufacturing Import Services Wholesale & Retail stage. Income Tax Ordinance, 2001 Sales Tax Act, 1990 Income Tax[2013] Sales tax guide[2010] 7. An indirect tax source. Goods imported into Pakistan. Regulatory duty of up to 100 %. Additional custom duty 25 %. Special custom duty on the import of goods manufactured in Pakistan. On few sectors Tobacco Banks Telecom Duty applied at a standard rate of 16 %. Special FED at 1% has been levied on goods . Customs Act ,1969 Federal Excise Act, 2005 Federal Excise Act.[2010]< http://www.cbr.gov.pk/CategoryLayout.aspx?view]&ActionID=346&ArticleID=> Pakistan Customs Tariff .[2013]< http://www.pakcustoms.org/pakistan_customs_tariff/> 8. SIMPLIFICATION OF TAX LAWS Income Tax Ordinance, 2001 and Income Tax Rules, 2002 introduced . Federal Excise Act, 2005 and Federal Excise Rules 2005 introduced. Customs and Sales Tax Law updated and improved. Universal Self-Assessment scheme. Income Tax[2013] Article on Reforms.[2012]< http://www.cbr.gov.pk/ShowArticle.aspx?view=Article&ActionID=174&ArticleID=> 9. TAX RATES REDUCTION AND RATIONALIZATION Tax Rates reduction and rationalization Personal tax rates for salaried individuals reduced and rationalized to 0.25% to 20% from 3.5% to 30%. Uniform Corporate tax rate for Companies of 35% Introduction of low tax rate of 20% for small companies. Income Tax.[2010] INCOME TAX 10. FBR issued simplified rules to regulate the GST procedures . Turnover subject to Sales Tax raised from Rs.0.5 million to Rs.5.0 million. All exports shall be zero-rated. No general zero-rating shall be admissible on any local supply or consumption. Article on Reforms.[2012]< http://www.cbr.gov.pk/ShowArticle.aspx?view=Article&ActionID=174&ArticleID=> TAX RATES REDUCTION AND RATIONALIZATION SALES TAX 11. Maximum standard rate reduced to 25%. Number of slabs reduced to five 0% 5%, 10%, 20%, 25%. Special reduced rate of duty of 5% for capital goods. Reforming Customs Clearance.[2010] TAX RATES REDUCTION AND RATIONALIZATION CUSTOM 12. ADMINISTRATIVE REFORMS Re-structuring the Top Structure of FBR . Working on functional lines. Audit & Inspection. E-filing of Returns. TMS and STMS systems introduced. Pakistan Customs Computerized System (PaCCS) Average clearance time reduced to four hours from five days for imports and one hour for exports. Article on Reforms.[2012]< http://www.cbr.gov.pk/ShowArticle.aspx?view=Article&ActionID=174&ArticleID=> 13. TAX PAYING SECTOR OF PAKISTAN Appraising the Pakistan Tax System[2009] 14. EXEMPTIONS Complete exemption of imported machinery from custom duty, sales tax and import surcharge in rural areas, if such machinery is not locally manufactured. Private power plants in rural areas. Plant and machinery not manufactured in Pakistan. Tax holiday. Zero rated Exports. Tax Payers.[2010] The Future Path of Tax Reforms in Pakistan.[2013] 15. RECOMMENDATIONS Tax all income above a certain threshold irrespective of source. Simplification of the Tax Structure. More focus is given to direct taxation. Greater stress on taxpayers education, service and facilitation. Improvement in HRM strategy with respect to induction, promotion, training and compensation of Employees. Tax money is actually spent on public welfare and infrastructure projects 16. THANK YOU !!