Taxes in Pakistan

Government earns revenue through plenty of ways like interests , dividends ,trading profits etc and tax is one of the primary tool of revenue in above mentioned ways. Some one rightly describes tax as;
“A fine is a tax for doing something wrong whilst tax is a fine for doing something right.”
Pakistan, the state of 180,800,000 people collected the total tax revenue of Rs 1,317,857 millions according to Budget estimate (B.E) 2008-09 which is less than satisfactory and witnessed actual slow in real term. I will begin my writing with Ogden Nash’s stanza

The more you earn, the less you keep,
And now I lay me down to sleep.
I pray the Lord my soul to take,
If the tax-collector hasn’t got it before I wake
.

The sources of tax revenue in Pakistan are:

  • Federal Taxes
  • Provincial Taxes
  1. Federal Taxes

Let’s take a detailed view of direct and indirect taxes of Pakistan.
Income Tax
It is kind of direct tax that is lived on a person having income more than the certain level. According to Plato:

When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”

The revised slabs for taxable income through Finance Act 2008 are given below;

S. No. Taxable income Rate of tax.
(1) (2) (3)
1. Where taxable income does not exceed Rs.180,000 For women taxpayer it is Rs.240,000. 0%
2. Where the taxable income exceedsRs.180,000 but does not exceed

Rs.250,000

0.50%
3. Where the taxable income exceedsRs.250,000 but does not exceed

Rs.350,000

0.75%
4. Where the taxable income exceedsRs.350,000 but does not exceed

Rs.400,000

1.50%
5. Where the taxable income exceedsRs.400,000 but does not exceed

Rs.450,000

2.50%
6. Where the taxable income exceedsRs.450,000 but does not exceed

Rs.550,000

3.50%
7. Where the taxable income exceedsRs.550,000 but does not exceed

Rs.650,000

4.50%
8. Where the taxable income exceedsRs.650,000 but does not exceed

Rs.750,000,

6.00%
9. Where the taxable income exceedsRs.750,000 but does not exceed

Rs.900,000,

7.50%
10. Where the taxable income exceedsRs.900,000 but does not exceed

Rs.10,50,000,

9.00%
11. Where the taxable income exceeds

Rs.10,50,000 but does not exceed

Rs.12,00,000,

10.00%
12. Where the taxable income exceedsRs.12,00,000 but does not exceed

Rs.1450,000,

11.00%
13. Where the taxable income exceedsRs.1,450,000 but does not exceed

Rs.1,700,000,

12.50%
14. Where the taxable income exceeds Rs.1,700,000 but does not exceed

Rs.1,950,000,

14.00%
15. Where the taxable income exceeds Rs.1,950,000 but does not exceed

Rs.2,250,000,

15.00%
16. Where the taxable income exceeds Rs.2,250,000 but does not exceed

Rs.2,850,000,

16.00%
17. Where the taxable income exceeds Rs.2,850,000 but does not exceed

Rs.3,550,000,

17.50%
18. Where the taxable income exceeds Rs.3,550,000 but does not exceed

Rs.4,550,000,

18.50%
19. Where the taxable income exceeds Rs.4,550,000 but does not exceed

Rs.8,650,000,

19.00%
20. Where the taxable income exceeds Rs.8,650,000 20.00%

Workers Welfare Tax

It is charged at 2% on the manufacturers having income of Rs 100,000 and above. Employees Old Age Benefit Scheme is financed through this fund.

Capital Value Tax
Capital Value Tax is payable by every individual, association of persons, firm and company, not born on the National Tax Register. Currently CVT is payable with different rates on immovable commercial and non commercial property, residential flats, and purchase of shares of stock exchange.

Worker Profits participation Fund

This tax is paid by the industrial undertaking having more than 10 workers at 5% of their profits for distribution amongst workers. Any leftover amount after distribution amongst the workers is deposited with the government to become part of the WWF.

Custom Duties

Customs duties are levied through Customs Act, 1969 on goods imported into Pakistan. It contributes 24.4% in the indirect taxes and 15% in total taxes collected by FBR. The collection of custom duties is important as it also contributes in the base calculation of other taxes like sales tax on imports and withholding tax. Only 15 major commodity groups contributed 78% of the total customs duties during 2007-08. Auto sector is the top contributor of the customs duty. The composition of gross customs duty collection is provided as following:

1. Import Duties

2. Warehouse Surcharge

3. Export Development Surcharge

4. Misc (auctions, recovery of arrears, defense etc)

Federal Excise

Federal Excise Duties are levied on domestic production, imports and services rendered in the country. The major excisable commodities include cigarettes, cement, beverages, natural gas and POL products, whereas excisable services are; Air Travel, Insurance, Non-Fund Services provided (  In FY: 2007-08 the NFS were extended to full coverage of Non-fund Financial Services (NFS), and FED on Air Travel was rationalized.) by banking or non-bank financial companies and Franchise services. The old Central Excises Act, 1944 has been replaced by The Federal Excise Act, 2005, with effect from 1st July, 2005. As part of budgetary measures for the year 2007-08, Special FED at 1% has been levied on goods which are manufactured or are imported in Pakistan.

Sales Tax

Sales tax is liable on sales of all goods and services produced in the country excluding those goods exempted in the Sales Tax Act, 1990. The rate structure was different for native products and imports. The details of sales tax collection at import stage also point out the higher concentration as fifteen major commodity groups have contributed around 87% of total ST (imports) collection. The major commodity groups include POL Products (27), Edible Oil (15), Plastic (39), Vehicles and Parts (87), Iron and Steel (72), Mechanical Machinery (84), Electrical Machinery (85), Organic Chemicals (29), Paper & Paper Board (48), Oil seeds etc (12), Misc Chemicals Products (38), Rubber (40), Coffee, Tea, and Spices (9), Aluminum Products (76) and Articles of Iron & Steel (73).

Provincial Taxes


Conclusion
In above mentioned direct tax caption you must have been noticed that there is no wealth tax which is thought provoking. It has been stopped since 2007.Wealth tax for 2006-07 were Rs 47m .Will Durant rightly says;
“If our economy of freedom fails to distribute wealth as ably as it has created it, the road to dictatorship will be open to any man who can persuasively promise security to all?”
One of the primary maxims of taxation is that,the burden of tax should fall on the people according to their ability .But in Pakistan the case is opposite I-e taxed poor, exempt wealthy. Wealth tax is the best tool of controlling the alarming rate of unequal distribution in under developing economies like Pakistan. But unfortunately every next government of Pakistan starts loading its bank accounts rather than addressing the real problems of country. Gandhi brilliantly states;
“The things that will destroy us are: politics without principle; pleasure without conscience; wealth without work; knowledge without character; business without morality; science without humanity; and worship without sacrifice.”
References:
http://www.finance.gov.pk
http://www.fbr.gov.pk
State bank of Pakistan

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19 responses to this post.

  1. I agree with most of what is said here.

  2. Just want to say what a great blog you got here!
    I’ve been around for quite a lot of time, but finally decided to show my appreciation of your work!

    Thumbs up, and keep it going!

    Cheers
    Christian,Earn Free Vouchers / Cash

  3. not many places were you can find this much content and valuable information, thank you for this post
    Perry

  4. Posted by Hassan zaki on November 27, 2010 at 11:27 am

    thax man. very informative and to the point

  5. […] Taxes in Pakistan January 20104 comments 4 […]

  6. Posted by sara on February 18, 2011 at 2:29 pm

    Thank you sir! this blog has done wonders for me! 🙂

  7. Posted by hajra on February 19, 2011 at 6:04 pm

    thnx alot…..great blog…i was very tensd abt my assigmnt and then i got alot of info frm there…

  8. Posted by Mahnoor Asim on February 7, 2012 at 9:38 am

    Splendid blog..really very much informative…..

  9. Posted by aafaq on February 22, 2012 at 11:52 pm

    that is good and reliable information but i want why people do not pay tax because they already pay tax in the form for indirect tax.

  10. Posted by Zain on November 16, 2012 at 11:29 am

    outstanding blog, the reason for not paying taxes, because there are many curruptions in our country,when some1 is paying tax just thinking of that their safety and improvement in our country,but as we all know that there is no improvement in our country as much as we think,so may be its one reason for not paying taxes

  11. kindly write 6 type of provincial taxes with brief description, i am in dire need of it

  12. Posted by SeHar on January 13, 2015 at 2:45 pm

    I dnt like this post that much..
    Because, local taxes and provincial taxes is missing here.-_-

  13. Posted by saimah on May 18, 2015 at 9:20 pm

    I just want to say Thank you very much.That was very informative with some heart.

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  15. you have done a great job!!
    Thanks a lot 🙂

  16. Posted by ikramkhan on January 5, 2017 at 1:50 pm

    informative

  17. Posted by Marryam ch on April 5, 2017 at 6:12 am

    A best informative blog

  18. Posted by bahr on August 15, 2017 at 7:19 am

    some local and provincial taxes are missing, other wise good effort

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