Type of Taxes:

Different types of taxes are explained below:

�Direct taxes
Direct taxes are the taxes where incidence of taxation is on the person on
whom levied. For
example income tax
� Indirect Taxes
Indirect taxes are the taxes where incidence of tax can be shifted by the
person on whom levied to
other persons. For example sale tax
� Proportional Taxes
These taxes are levied with the same percentage. For example, sales tax is
levied at the rate of 15%.
� Progressive Taxes
This is based on the “capacity to pay” principle of taxation. In this type, the
rate of tax increase as
the income increase.
� Regressive taxes
A Regressive tax is the opposite of a Progressive Tax. It is based on the
benefits received principle.
A type of tax that takes a larger percentage from the income of low-income
people than the income
of high-income people is called regressive tax.
� Value Added Taxes.
This type of tax is levied at each stage of value addition. For example sales
tax
Taxation Structure of Pakistan:
� Federal Taxes:
Federal taxes are the taxes which can be levied by the federal government
and include among others
the followings:
� Income tax
� Corporate tax
� Customs duties/Tariffs
� Sales tax
� Provincial Taxes:
� Stamps Duty
� Registration Tax
� Motor vehicle tax
BASIC FEATURES OF INCOME TAX
Background/ History
Income Tax Act of 1922:
At the time of independence, this Act prevalent in undivided India was
adopted by the Government of
Pakistan as its Income Tax Law.
Income Tax Ordinance, 1979
First law on Income Tax was promulgated in Pakistan from 1st July, 1979.
Income Tax Ordinance, 2001
To updates the tax laws and brings our law in accordance with international
standards, this ordinance
was promulgated on 13th September, 2001, which became effective from 1st
July, 2002.
IT rules 2002
These were promulgated by CBR on 1st July 2002 in exercise of powers
granted under section 237 of the
Ordinance.
�Rules are integral part of the main enactment / Law.
� I.T Ordinance 1979 stands repealed vide section 238 of the Ordinance.
�The Ordinance overrules all other laws for the time being in force (Sec 3).
� Federal Government empowered to allow exemptions to certain types of
income or specific
persons during financial year but required to place the same before National
Assembly at the end of
that financial year Sec 53(3).
� CBR can issue administrative instructions explanations/circulars under the
powers vested through
Sec 206 and 213. However, CBR’s instructions not binding on Tax Payers
since these are
administrative interpretation not judicial interpretation.
Sec 206 and sec 213 of the ordinance are reproduced below:
Section 206:
(1)To achieve consistency in the administration of this Ordinance and to
provide guidance to
taxpayers and officers of the Central Board of Revenue, the Central Board of
Revenue may
issue Circulars setting out the Board’s interpretation of this Ordinance.
(2)A circular issued by the Central Board of Revenue shall be binding on all
Income Tax
Authorities and other persons employed in the execution of the Ordinance,
under the
control of the said Board other than Commissioners of Income Tax (Appeals).
(3)A Circular shall not be binding on a taxpayer.
Section 213:
In the course of any proceedings under this Ordinance, the Commissioner or
any taxation officer may be
assisted, guided or instructed by any income tax authority to which he is
subordinate or any other person
authorized in this behalf by the Central Board of Revenue.
� Case Law is an important source of interpretation.
� Decisions and interpretation of Supreme Court are binding on all courts in
Pakistan, according to
Article 189 of constitution 1973.
� Decisions and interpretation of High courts are binding on subordinate
courts/tribunals in the area
of their jurisdictions.
Basic Features of Income Tax Ordinance 2001
Scheme of the Ordinance is given below:
�There are thirteen chapters
�Chapters are divided into:
�Parts &
�Divisions
�There are 240 Sections
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Taxation Management – FIN 623 VU
�This ordinance comprises of seven Schedules
�Schedules are integral part of the Ordinance.