The document discusses the effects of income tax and value-added tax (VAT) on individual progress in Pakistan. It provides background on income tax and VAT, and notes that the Pakistani government is considering replacing sales tax with VAT to increase tax revenue collection. However, implementing VAT could negatively impact consumers and businesses through price hikes, and harm exports. The document also notes that taxes reduce productivity and economic efficiency, and that most Pakistanis do not currently pay income taxes.

2. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
Group members:-
Adnan Abdullah
Maham Abro
Hasan Shabir
Asfand yar

3. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
What is Income tax:-
 A tax that governments
impose on financial
income generated by all
entities within their
jurisdiction
What is Value Added
Tax:-
 Value added tax is a
consumption tax (CT)
levied on any value that is
added to a product.

4. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
 The government is giving a serious
consideration to replace the general sales tax
(GST) with value added tax (VAT) from next
financial year to increase the tax revenue
collection.
Would the collection of VAT generate sufficient economic revenue or would the end
result be disgruntled consumers and businessmen coping with the price hike?

5. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
 The argument in favour of imposing the VAT
tax is based on the theory that it will
inadvertently increase income tax rates,
which is a less destructive way to raise
revenue.

6. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
 It will also lead to transfer
of resources from the
productive sector of the
economy to the public
sector, diminishing
economic efficiency.
 the implementation of VAT
will seriously hamper
exports by eliminating
zero-rated status of the
export-oriented sectors.

7. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
 implementation of VAT would lead to
informal economy’s expansion, along with a
decrease in national tax collection.

8. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
 When a consumer buys a product, they have
no idea how much of the price being paid is
attributed to tax.

9. THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN
 Pakistan agreement
 The International Monetary
with IMF:-
Fund (IMF) approved the $7.6
billion standby arrangement for
Pakistan to be delivered over
23-month.
 As expected, a number of
conditions were imposed by
the IMF.
 One of the demands of the
lender was introduction of
Value Added Tax (VAT)

10. The trend existing in Pakistan is unfortunately on the contrary.

11. Pakistan Income tax

12.  Broad categories of taxpayers:-
Following are the broad categories of
taxpayers:-
 Companies
 Association of Persons (AOP)
 Non Salaried Individuals
 Salaried individuals
THE EFFECTS OF INCOME TAX AND VAT
ON INDIVIDUAL PROGRESS IN
PAKISTAN

13.  HOW TAXES FINANCE THE GOVERENMENT:
 Productivity declines as the tax rate increases, as
people choose to work less
 higher the tax rate, the more time people spend
evading taxes and the less time they spend on
more productive activity
THE EFFECTS OF INCOME TAX AND VAT ON
INDIVIDUAL PROGRESS IN PAKISTAN

14. THE EFFECTS OF INCOME TAX AND VAT
ON INDIVIDUAL PROGRESS IN
PAKISTAN How Taxes Affect the
Business Environment
 Most obviously, taxes
paid by firms reduce
net profit
 Taxes also add
(indirectly) to business
costs by imposing
compliance costs

15. THE EFFECTS OF INCOME TAX AND VAT
ON INDIVIDUAL PROGRESS IN
PAKISTAN  Tax effect in investment
analysis becomes even more
Effect of Income Taxes on
complicated when you consider
Investments
that your income tax bracket
may be different during your
retirement years as compared
to your earning years
 It allows you to put a limited
amount of earned income per
year directly into an account
that defers the income tax due
until when the money is
withdrawn

16. THE EFFECTS OF INCOME TAX AND VAT
ON INDIVIDUAL PROGRESS IN
PAKISTAN
 Income tax and VAT
affect you:-  Taxes are collected from
people on fixed income: office
employees, teachers, clerks
etc
 Less than 2% of Pakistanis
pay any income tax.
 Revenues come primarily
from skyrocketing prices of
items of daily need; value
added tax on commodities
that affects the poor the
hardest, and foreign aid

17. THE EFFECTS OF INCOME TAX AND VAT
ON INDIVIDUAL PROGRESS IN
PAKISTAN
 Pakistanis are not  According to the Household
Integrated Economic Survey
overtaxed 2008, conducted by the
Federal Bureau of Statistics,
the bottom 60 per cent of
Pakistanis (by income) spend
over 65 per cent of their
income on food and housing
 top 20 per cent of households
are eligible to pay income tax
 5.95 per cent effective tax
rate.

18.  WHAT MUST BE DONE?
 A four-pronged strategy should be adopted to develop
an indigenous model.
 On the one hand, a thorough study of the economic
structures and level of development of the economy
should be conducted by genuine economists particularly
having tax background.
 On the other hand, supply chain of distribution and sale
should be understood and documented.

19. THE EFFECTS OF INCOME TAX AND VAT
ON INDIVIDUAL PROGRESS IN
PAKISTAN
 There could be several public discussions on
the advantages and disadvantages of VAT,
but there is an essential need to comprehend
the real world impact of it, and to debate on
its implementation with an open mind.