Taxation in Pakistan

What is Taxation?

"The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." (Colbert, 1665) 

Colbert has rightly defined taxation as it is the amount that the government pluck from the public as to  increase the development and the facilities to the people or to enhance the economy. In other words tax is the amount that the democratic government charges its citizens and corporate businesses. The charges collected by the government are used to fund different government projects that would in the end benefits citizens of the country as a whole. This process can benefit both the society and the business as a whole. 

Types of Taxes:

    

                           Here is the short introduction of all these types of taxes

1. Direct taxes: It is the tax that is paid directly from the individual or the organization to the imposing entity. 

• Income tax: A tax that government impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an  income tax return every year to determine whether they are eligible for any tax refund.
  
  
  
  
  
• Wealth tax: A wealth tax (also called a capital tax, equity tax, or worth net tax ) is a levy on the total value of personal assets: these assets include, but are not limited to, cash ,bank deposits, fixed assets, shares, private cars, assessed value of real property, pension plans, money funds, owner occupied housing and trusts. 

2. Indirect taxes: A tax levied on goods and services rather than on income and profit is called indirect taxes. 

• Service tax: It is a form of indirect tax which is provided only on the services provided. But is actually born by the customers. 

                                                                                                                                          

• Value added tax: VAT or the General sales tax (gst) is also known as consumption tax. From the purchaser perspective it is a tax on the purchase price. 
  
•    Excise Duty Tax: A fixed tax that is levied on an activity or occupation, such as the license fee charged from an attorneys, doctors and other professions. Also called excise tax.
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         Custom Duty Tax: A tax levied on imports (or sometimes on exports) by the customs duty authorities of a country to raise its revenue is called custom duty tax.

  

Revenue Collecting Institutions:

Federal Board Of Revenue: Most commonly called as FBR is the semi-autonomous supreme agency of Pakistan that is responsible for auditing, enforcing and collecting revenue for the Government of Pakistan. FBR has following responsibilities.

• Formulation and administration of fiscal policies.
• Levy and collection of federal taxes.
• Quasi-judicial function of hearing of appeals.

        FBR is considered as the largest bureaucracy in Pakistan. as the agency conduct audit of the tax payers regularly so it is called as the Guardian of national treasury in Pakistan.

Tax Collection Trend:

  This is the chart of trend of taxes collected by the Central Board Of Revenue of Pakistan with figures in millions of Pakistani rupees.

Year	Total	Direct Taxes	Indirect Taxes
1996	129,282,087	658,485,060	211,597,027
2000	982,392,277	251,124,585	124,5267,692
2005	429,282,087	129,282,087	611,597,027