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 <http://kalyan-city.blogspot.com/2010/12/what-is-tax-definition-adam-smith.html>

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]<http://www.cbr.gov.pk/CategoryLayout.aspx?view=Category=326&ArticleID=>
Sales tax guide[2010]<http://www.pakcustoms.org/sales_tax_guide/>

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]<http://www.cbr.gov.pk/CategoryLayout.aspx?view=Category=326&ArticleID=>
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]<http://www.cbr.gov.pk/OfficeHomePage.aspx?view=Office%20Home%20Page&ActionID=49&ArticleID=160#>
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]<https://www.wbginvestmentclimate.org/uploads/Pakistannote9.pdf>
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]<.http://mq.com.pk/docs/Appraising-the-Pakistan-Tax-System.pdf>

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]<http://thinktankpakistan.com/content.php?page=Tax_Payers>
The Future Path of Tax Reforms in Pakistan.[2013]<http://lahoreschoolofeconomics.blogspot.com/2013/12/in.html>

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 !!