Pakistan tax policy

Porf: faisal javeed

Group members • Nouman Quresh• Rana ejaz• Umer salem• Marria • Kashif mushtaq• Taous rubab

Taxes matter• Taxes affect citizens, economy of the country, businesses,

governance mechanisms, etc. Not only revenue mobilization, an effective system of taxation helps in formalizing the economy, encourages economic growth, shapes political cohesion between tiers of the Government, and results in increase in social sector service delivery.

The tax collected in Pakistan is inadequate to meet the needs of the society

CURRENT SITUATION REVENUE ANALYSIS

Pakistan’s revenue as proportion of its GDP is lowest amongst the emerging markets.

Total Government revenue increased by 17 percent in real terms between 2005-06 and 2013-14.

Total Government revenue increased by 17 percent in real terms between 2005-06 and 2013-14.

Out of the total revenue, tax collections have increased by 27 percent in real terms since 2005-06.

 Revenue Heads

 2005-06PRs. bn

Share in Total Tax Revenue

 2013-14PRs. bn

Share in Total Tax Revenue

 NominalChange

 Real

Change

Total Tax Revenue 804   2,075   158% 26.7%Federal Government Tax Revenue 767 95% 1,968 95% 157% 25.9%

Direct Taxes 215 27% 732 35% 240% 67.0%

Indirect Taxes 501 62% 1,150 55% 129% 12.6%Sales Tax 295 37% 809 39% 174% 34.6%

Custom Duties 138 17% 218 11% 58% -22.4%

Federal Excise 68 8% 122 6% 79% -12.0%

Levies & Surcharges 51 6% 87 4% 71% -16.3%

Petroleum Levy 25 3% 60 3% 141% 18.4%

Gas Development Surcharge 26 3% 23 1% -12% -56.8%

Others - 0% 4 0%    

Provincial Tax Revenue 37 5% 107 5% 191% 42.8%

Indirect Taxes 37 5% 107 5% 191% 42.8%

Property Taxes 9 1% 8 0% -13% -57.3%

of which: Agriculture Tax 1 0% 1 0% 25% -38.7%

Duties (Excise and Stamp) 12 1% 21 1% 73% -15.3%

Motor Vehicle Tax 7 1% 11 1% 59% -22.2%

Others* 8 1% 67 3% 743% 313.6%

Since 2005, the average general government12 tax to GDP ratio was around 9.4 percent of GDP

Tax collection by the Federal Government as a proportion of GDP is only slightly below that in India, Bangladesh, China and Indonesia.

Of the total Federal Taxes collected in Pakistan, the proportion of taxes on incomes and profits is low compared with other selected countries

The share of direct taxes in the total taxes increased from 35 percent in 1998 to 39 percent in 2014, while the share of indirect taxes fell from 65 percent to 61 percent

  Direct Taxes Indirect Taxes Total

 YEARS

Share in total AnnualGrowth

Share in total AnnualGrowth

AnnualGrowth

  Taxes (%) (%) Taxes (%) (%) (%)

1998-99 35.1 21.3 64.9 -3.3 4.11999-00 35.7 6.8 64.3 0.6 9.42000-01 32.5 2.5 67.5 18.1 12.52001-02 31.8 10.3 68.2 14.3 13.02002-03 35.3 14.4 64.7 -2.3 3.02003-04 33.0 6.6 67.0 18.0 14.02004-05 31.7 8.7 68.3 15.2 13.12005-06 31.1 11.1 68.9 14.4 13.42006-07 31.5 22.7 68.5 20.0 20.82007-08 39.4 48.3 60.6 5.1 18.82008-09 38.5 16.2 61.5 20.8 19.02009-10 38.2 14.4 61.8 15.7 15.22010-11 39.6 18.6 60.4 11.7 14.32011-12 38.7 14.5 61.3 19.2 17.42012-13 39.2 22.6 60.8 19.7 20.8Average 35.4 15.9 64.6 12.5 13.9

Average since 2005-06 37.9 22.5 62.1 16.0 18.0

Pakistan tax policy• FEDERAL TAXES• PROVINCIAL TAXES

Number of tax payers in Pakistan

Following are some specific suggestions to reduce the burden of import taxes and simplify each of the major taxes.

• multiple sales tax rates • sales tax from petroleum• Income Tax

The following new sources for collecting income tax are being proposed• total assets • inheritance tax • third party information• sale of immovable properties if sold after ownership of more

than two years. • Another problem is that within domestic taxes, over 70% of

the tax burden is placed on manufacturing, despite the fact that its share in Pakistan’s GDP is about 25%. Agriculture, which constitutes about 20% of GDP, contributes less than 1% of tax. Similarly, services constitute 54% of GDP but contribute only 25% of total taxes.

NADRA Database

Withholding Tax Reform

Customs Duty:• There should be a maximum of three tariff slabs, for

example: 5% (raw materials), 10% (intermediary goods) and 20% (consumer goods). There should also be a conscious policy

Savings Tax:

Capital Gains Tax:

Corruption• customs department • dedicated personnel should be hired• the tax machinery should be held accountable • any abuse of authority if observed should be punished

suitably• honesty and reward hard work in the tax machinery

Reduction in Non – Developmental Expenditure:

Elimination of Black Economy:

Formation of Intelligence Tax Bureau:• Monitor the online transaction • Intercept the financial dealings • to reduce the money laundering • financial data of Pakistani citizens from foreign countries.• Make check over officials who directly deals with the

collection and assessment of tax.

Reformation of Legal procedures:

STRATEGIC SHIFT AGENDA

Conclusion