Professional Documents
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Table of Contents
1. Tax System in Pakistan............................................................................................................ 4 Income Tax .................................................................................................................................. 4 Sales Tax ..................................................................................................................................... 4 Liability to Sales Tax .................................................................................................................. 5 The Federal Excise ...................................................................................................................... 5 Federal Excise duty is payable on: .............................................................................................. 6 Special Excise Duty .................................................................................................................... 6 Agreement for avoidance of double taxation .............................................................................. 6 2. Tax Policy & Administration .................................................................................................. 7 Winds of Change ......................................................................................................................... 8 3. Old Organizational Structure of FBR or CBR......................................................................... 8 GOALS OF CBR ........................................................................................................................ 8 FAILURE OF CBR ..................................................................................................................... 9 4. Previous structure sales tax department................................................................................... 9 Collectorate of sales tax in Pakistan ............................................................................................ 9 Officers in collectorate ................................................................................................................ 9 Departments in collect orate ...................................................................................................... 10 5. Previous structure of income tax department ........................................................................ 10 Income tax regions in Pakistan.................................................................................................. 10 Officers of income tax ............................................................................................................... 10 Offices of income tax ................................................................................................................ 10 6. Appellate structure ................................................................................................................. 11 Custom Excise and Sales Tax Appellate Tribunal .................................................................... 11 Previous Appellate Structure of Income Tax ............................................................................ 12 7. New Organizational Structure of FBR .................................................................................. 13 Organizational Chart of the FBR .............................................................................................. 14 Federal Board of Revenue ......................................................................................................... 15 Current set up ............................................................................................................................ 18 Functions of FBR Revenue Division ........................................................................................ 18 Superior University Lahore Page 2
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Sales Tax
Sales Tax was a provincial subject at the time of partition. It was being administered in the provinces of Punjab & Sindh as provincial levy. Sales tax was declared a federal subject in 1948 through the enactment of General Sales Tax Act, 1948 and in 1952, this levy was transferred permanently to the Central Government. Sales tax was levied at the standard rate of 6 pies per rupee at every stage whenever a sale was affected. The trading community protested against this system, and this resulted in the enactment of Sales Tax Act 1951. A system of licensed manufacturers & wholesalers was instituted whereby they were allowed to purchase goods free of sales tax from each other and pay tax on sales to unlicensed traders. Imports were chargeable to Sales Tax but the licensed manufacturers & wholesalers were allowed to import goods without the payment of Sales Tax. Later on Sales Tax became chargeable on locally produced & imported goods at the time of their sales & import, respectively. The sales tax, was collected under the Finance Ordinance, 1956, on goods which were chargeable to Central Excise Duty, as if it were a duty of Central Excise. In April 1981, by virtue of an amendment in the Sales Tax act, 1951, the collection of Sales Tax on non-excisable goods was also entrusted to the Central Excise Department. In the late eighties the government decided to replace Sales Tax with the Value Added Tax in the country as a part of its structural adjustment program which was undertaken to correct anomalies & distortions both in our tax & non-tax regimes. Accordingly new enactment titled Sales Tax Act 1990 replaced Sales Tax Act 1951
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Previously it was being charged at the manufacturing & import stage, and its scope has been extended now to remaining sectors. Sales Tax is chargeable on all locally produced and imported goods except computer software, poultry feeds, medicines and unprocessed agricultural produce of Pakistan and other goods specified in Sixth Schedule to The Sales Tax Act, 1990.
The Federal Excise The Federal Excise Act, 2005, was promulgated with effect from 1st July, 2005, repealing the Central Excises Act, 1944. Following are some of the significant changes brought about by the new Act:
The word Federal was used in place of Central. Therefore, now the term Federal Excise Duty is more appropriate as compared to old Central Excise Duty for the duties of excise levied under the 2005 Act. The system of physical supervision has been entirely done away with and now all clearances will be self-assessed and no prior permission for clearance will be required. The payment of duty will be on monthly basis and the duty on all clearances during the month will be payable by the 15th of next month. This is in contrast to previous requirement of payment of duty prior to clearance. No gate passes are required for clearances as in the old system. Double taxation has been eliminated by allowing adjustment of the excise duty paid on the Page 5
On some services and goods FED is payable in VAT more i.e. in the same manner as provided in the Sales Tax Act, 1990? For details see the link Goods/Services Liable to Excise Duty on this page.
Federal Excise duty is payable on: (a) goods produced or manufactured in Pakistan; (b) goods imported into Pakistan; (c) such goods as the Federal Government may, by notification in the official Gazette, specify, as are produced or manufactured in the non-tariff areas and are brought to the tariff areas for sale or consumption therein; and (d) services, provided or rendered in Pakistan;
Special Excise Duty 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. This duty is in addition to FED as prescribed in First Schedule of the Federal Excise Act, 2005. For list of goods excluded from purview of this special duty and other details see SRO 655(I)/2007.
Agreement for avoidance of double taxation The Government of Pakistan has so far signed agreements to avoid double taxation with 39 countries including almost all the developed countries of the world. These agreements lay down the ceilings on tax rates applicable to different types of income arising in Pakistan. They also lay down some basic principles of taxation which cannot be modified unilaterally. The list of countries with which Pakistan has concluded tax treaties is given below:
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Austria
Belgium
Bangladesh Canada
China
Denmark
Egypt
France
Finland
Germany
Greece
India
Indonesia
Iran
Ireland
Italy
Japan
Malta
Mauritius
Romania
Switzerland Thailand
Turkmenistan U.K.
Turkey
Tunisia
Kazakhstan
U.A.E.
U.S.A
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Winds of Change Somewhere in 1980s there was a realization that the tax system needs restructuring and reforms. Since then, different Task Forces and Research Groups were constituted and their contribution has resulted into following valuable studies/reports: Report by the National Taxation Reform Commission (1986); Report by the Resource Mobilization and Tax Reforms Commission (1994); Report on Income Tax Reforms (2001); Several Reports by the Task Force on Reform of Tax Administration (2001); Strategy and Priorities for Tax and Customs Administration Reform (2001) The Strategy Document on Tax Reform (2001) Pakistan: A Preliminary Assessment of the Federal Tax System (2006) and Tax Policy in Pakistan: An Assessment of Major Taxes and Options for Reform (2008)
To Broaden Tax Base Apart From Increased Revenue Collection Educated Tax Payer Improved Tax GDP Ratio Improve Tax System and Decrease Parallel Size Of Economy
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Officers of income tax 1. 2. 3. 4. 5. 6. 7. 8. 9. Regional commissioners Commissioners Additional Commissioners Deputy Commissioners Assistant Commissioners Income tax officer Special officer Inspectors Lower staff
Offices of income tax 1. 2. 3. 4. Regional commissioner office (R.C) Zonal Office (commissioner) Range (Additional Commissioner) Circle ( DC, AC, ITO, SO)
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6. Appellate structure
Appeal to the Collector (Appeals) 1. Collector (appeals ) 2. All cases of customs, federal Excise and Sales tax. Custom Excise and Sales Tax Appellate Tribunal Appellate tribunal It means customs, Excise and Sales Tax appellate Tribunal constituted u/s 194 of custom act. Appointing authority The federal government has the appointing authority of the appellate tribunal Members The appellate tribunal consists of two types of members. Judicial members Shall be a person who has been a. A judge of high court b. A district judge and is qualified to be a judge of high court c. An advocate of high court and is qualified to be a judge of high court
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Karachi Large Taxpayer Units (LTU) LTU Karachi, being the first pilot project of FBR, was launched on 1st July 2002, symbolizing the new face of FBR tax administration. The Tax Administration Reforms Program in Pakistan (TARP) envisages a complete shift from conventional bureaucratic concept of enforcement to voluntary compliance, from periodic assessment to risk based audit and from traditional aloofness to proactive taxpayers' facilitation.
Lahore Large Taxpayer Unit Federal board of revenue welcomes you to the Large Taxpayer unit (LTU) Lahore. The unit is working at 6-7 Floor, Income tax House, and Nabha Road, Lahore. The LTU handle all domestic taxes (income tax, sales tax & federal excises) of most of the Lahore based, which qualify the criteria laid down for selection of cases in LTU and those which belong to the following sectors.
Islamabad Large Taxpayer Unit Large Taxpayer Unit (LTU) Islamabad, Federal Board of Revenue has achieved a new landmark, showing 729 percent increase in the income tax collection out of current demand created during July-March (2011-12) as compared to the corresponding period of last fiscal.
Sources told Business Recorder here on Monday that the performance of the LTU Islamabad during July-March (2011-12) has shown remarkable growth in all taxes particularly recovery of income tax arrears. The latest data revealed that the income tax collection out of current demand created was Rs 20.8 billion during July-March (2011-12) against Rs 2.5 billion in the same period last fiscal, reflecting an exceptional increase of Rs 18.3 billion.
In percentage terms, there is a record increase of 729 percent in the income tax collection out of current demand created during the period under review. Similar kind of positive trend has been observed in the income tax demands created by the LTU Islamabad. Income tax demand of over Rs 95 billion has been created during this period against Rs 43 billion in the corresponding period last fiscal, showing an extraordinary increase of 120 percent.
The ongoing performance of the LTU Islamabad would enable the FBR to achieve the ambitious revenue collection target of Rs 1952 billion by the end of current fiscal. According to the data, LTU Islamabad has collected Rs 107.648 billion as income tax during July-March (2011-2012) against Rs 73 billion in the corresponding period of last fiscal, showing a growth of 47 percent.
The collection of sales tax was Rs 91.078 billion during the first nine months of current fiscal against Rs 81 billion in the same period last fiscal, showing an increase of 12 percent. During this period, LTU Islamabad has collected Rs 33.158 billion as Federal Excise Duty (FED) during Superior University Lahore Page 16
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In the existing setup, the Chairman, FBR, being the executive head of the Board as well as Secretary of the Revenue Division has the responsibility for
His responsibilities also involve interaction with the offices of the President, the Prime Minister, all economic Ministries as well as trade and industry.
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NEW SYSTEM
Direct and indirect interaction with tax payers. Use of sophisticated MIS system. Professional dress code is implemented. Electronic attendance system introduced. Tax payer facilitation is the first obligation. Tax payers are educated and assisted through seminars and work- shops.
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