TAXATION – CAF 6
OBJECTIVE, SYSTEM AND HISTORICAL BACKGROUND, CONSTITUTIONAL PROVISIONS AND ETHICS
CHAPTER 2 – CONSTITUTIONAL PROVISIONS OF TAXES
REFERENCE TOPIC DESCRIPTION
Chapter 2 Scope
Constitution of Pakistan
FEDERAL FINANCIAL Federal consolidated fund (FCF) and
PROCEDURES public account (Article 78)
Custody of federal consolidated fund
and public account [Article 79]
Expenditure charged upon federal
consolidated fund [Article 81]
(Q3)
Annual Budget statement [Article 80]
Procedure relating to annual budget
statement [Article 82]
Authentication of schedule of
authorized expenditure [Article 83]
EXPLANATION
➢ Federal financial procedure
➢ Provincial financial procedure
➢ Distribution of revenues between federation and provinces
➢ Federal / provincial legislative list
➢ prime source of all legislations in Pakistan
➢ provides that tax for Federation shall be levied under the authority of Act of Parliament (Article 77)
➢ distributes powers among Federation and Provinces
➢ provides procedures for levy and collection of taxes
➢ provides procedures for use of funds received
FEDERAL FINANCIAL PROCEDURES
➢ All Revenues, loans, repayment of loans by FG form part of Federal Consolidated Fund
➢ All other monies by FG, or by SC or any court under Federation credited to the Public Account of the Federation
➢ Regulated by Act of Majlis-e-Shoora (Parliament)
➢ Rules made by the President (until above provisions are not made)
➢ remuneration of the President and expenses related to his office
➢ remuneration of
i. Judges of SC & IHC
ii. Chief Election Commissioner
iii. Chairman and Deputy Chairman of Senate
iv. Speaker and Deputy Speaker of the NA
v. Auditor General
➢ The administrative expenses, including remuneration to officers and servants of SC, IHC, Dept. of Auditor General, Office of Chief
Election Commissioner and Election Commission and Secretariats of Senate and NA
➢ All debt charges and other charges for which FG is liable, including interest, SF charges, Repayment and amortization of capital,
other loan raising expenditure, and redemption of debt on the security of federal consolidated fund
➢ Any sum required to satisfy any judgment against Pakistan
➢ Any other sum declared by Constitution or Parliament
➢ FG shall in respect of every financial year laid before NA
➢ a statement of estimated receipts and expenditure of FG
➢ show separately:
i. sums required to meet expenditure described by the Constitution from Federal Consolidated Fund
ii. sums required to meet other proposed expenditure from Federal Consolidated Fund
➢ distinguish expenditure on revenue account from other expenditure
➢ expenditure related to Federal Consolidated Fund may be discussed in NA, but not submitted to vote
➢ other expenditure shall be discussed in NA in the form of demands for grant, to vote
however, demand shall be deemed to be assented unless it is refused/ reduction in amount by majority of members of NA
➢ No demand for a grant except on recommendation of FG
➢ The PM shall authenticate by his signature a schedule specifying:
i. grants made by NA
ii. several sums required to meet the expenditure charged upon the Federal Consolidated Fund
➢ Authenticated schedule laid before the NA, not open to discussion or vote
➢ Expenditure from Federal Consolidated Fund deemed authorised when authenticated and laid before the NA
 Supplementary and excess grants
[Article 84]
Votes on account [Article 85]
Power to authorize expenditure
when assembly stands dissolved
[Article 86]
Secretariats of Majlis-e-Shoora
(Parliament) [Article 87]
Finance committees [Article 88]
PROVINCIAL FINANCIAL Provincial consolidated fund and
PROCEDURES public account (Article 118)
Custody of Provincial consolidated
fund and public account [Article 119]
Expenditure charged upon Provincial
consolidated fund [Article 121]
Annual Budget statement [Article
120]
Procedure relating to annual budget
statement [Article 122]
Authentication of schedule of
authorized expenditure [Article 123]
➢ If in respect of any financial year it is found that:
i. amount authorized is insufficient
ii. need for expenditure not included in Annual Budget Statement
iii. amount expended in excess
➢ FG may authorize the expenditure from the Federal Consolidated Fund; and
➢ laid before the NA Supplementary/ Excess Budget Statement; and
➢ Article 80 to 83 apply accordingly
➢ NA shall have power
➢ to make any grant in advance in respect of estimated expenditure for part of any financial year
➢ not exceeding 4 months
➢ pending completion in Article 82 and authentication as in Article 83
➢ In case NA stands dissolved the FG may authorize expenditure from FCF in advance in respect of estimated expenditure
➢ not exceeding 4 months
➢ pending completion in Article 82 and authentication as in Article 83
➢ Each house shall have separate secretariats, may have common posts
➢ Parliament may regulate recruitment and conditions of service of the Secretarial staff
➢ Until provision is made by Parliament, Speaker or Chairman with the approval of the President make rules for recruitment and
conditions of service of the Secretarial staff
➢ expenditure of the NA controlled by NA on the advice of Finance Committee
➢ expenditure of the Senate controlled by Senate on the advice of Finance Committee
➢ Finance Committee consist of the speaker/ the Chairman, the Minister of Finance, such other elected members by NA or Senate
➢ Finance Committee may make Rule regulating its procedure
PROVINCIAL FINANCIAL PROCEDURES
➢ All Revenues, loans, repayment of loans by PG form part of Provincial Consolidated Fund
➢ All other monies by PG, or by HC or any court under Province credited to the Public Account of the Province
➢ Regulated by Act of Provincial Assembly
➢ Rules made by the Governor (until above provisions are not made)
➢ remuneration of the Governor and expenses related to his office
➢ remuneration of
i. Judges of HC
ii. Speaker and Deputy Speaker of the PA
➢ The administrative expenses, including remuneration to officers and servants of HC and Secretariats PA
➢ All debt charges and other charges for which PG is liable, including interest, SF charges, Repayment and amortization of capital,
other loan raising expenditure
➢ Any sum required to satisfy any judgment against Province
➢ Any other sum declared by Constitution or PA
➢ PG shall in respect of every financial year laid before PA
➢ a statement of estimated receipts and expenditure of PG
➢ show separately:
i. sums required to meet expenditure described by the Constitution from Provincial Consolidated Fund
ii. sums required to meet other expenditure proposed from Provincial Consolidated Fund
➢ distinguish expenditure on revenue account from other expenditure
➢ expenditure related to Provincial Consolidated Fund may be discussed in PA, but not submitted to vote
➢ other expenditure shall be discussed in PA in the form of demands for grant, to vote
➢ No demand for a grant except on recommendation of PG
➢ The CM shall authenticate with signature a schedule specifying:
i. grants made by PA
ii. several sums required to meet the expenditure charged upon the Provincial Consolidated Fund
➢ Authenticated schedule laid before the PA, not open to discussion or vote
➢ Expenditure from Provincial Consolidated Fund deemed authorised when authenticated and laid before the PA
 Supplementary and excess grants
[Article 124]
Votes on account [Article 125]
Power to authorize expenditure
when assembly stands dissolved
[Article 126]
Provisions relating to provincial
assembly, etc. to apply to provincial
assembly, etc. [Article 127]
DISTRIBUTION OF REVENUE BETWEEN FEDERATION AND PROVINCES
DISTRIBUTION OF REVENUE National Finance Commission [Article
BETWEEN FEDERATION AND 160]
PROVINCES (Q2, Q4, Q6 & Q9(a))
➢ If in respect of any financial year it is found that:
i. amount authorized is insufficient
ii. need for expenditure not included in Annual Budget Statement
iii. amount expended in excess
➢ PG authorize the expenditure from the Provincial Consolidated Fund; and
➢ laid before the PA Supplementary/ Excess Budget Statement; and
➢ Article 120 to 123 apply accordingly
➢ PA shall have power
➢ to make any grant in advance in respect of estimated expenditure
➢ not exceeding 3 months
➢ pending completion in Article 122 and authentication as in Article 123
➢ In case PA stands dissolved the PG may authorize expenditure from Provincial Consolidated Fund in advance in respect of
estimated expenditure
➢ not exceeding 4 months
➢ pending completion in Article 122 and authentication as in Article 123
➢ Certain provisions of Articles are applicable on PA as follows
i. Parliament as PA
ii. President as Governor
iii. FG as PG
iv. PM as CM
v. FM as PM
➢ Formation time: Within 6 months of the commencing day and thereafter Intervals not exceeding 5 years
➢ Constituted by President
➢ Consisting of Minister of Finance of FG & PGs and other persons appointed by President after consultation with Governors
➢ Duty of the Commission is to make recommendations to the President as to:
a) distribution between Federation and Provinces of net proceeds of taxes
b) the grants-in-aid by the FG to PGs
c) exercise by the FG and PGs of the borrowing powers conferred by the Constitution
d) any other matter referred by the President to the Commission
➢ Taxes in (a) above are following raised under the authority of the Parliament:
i) taxes on income, including corporation tax but not including taxes on income consisting of remuneration paid out of the
Federal Consolidated Fund (income tax)
ii) taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed (sales tax)
iii) export duties on cotton, and such other export duties as may be specified by the President; (custom duties)
iv) such duties of excise as may be specified by the President (FED); and
v) such other taxes as may be specified by the President
➢ Share of provinces in each award shall not less than previous award (share)
➢ The Federal FM and Provincial FMs shall monitor the implementation of award biannually; and
➢ lay their reports before Parliament and PAs
➢ Asap on recommendation, the President by order specify the share of net proceeds of taxes allocated to Provinces; and
➢ that share shall be paid to the Govt. of the Provinces;
➢ not form part of the Federal Consolidated Fund
➢ recommendations, together with an explanatory memorandum as to the actions taken
➢ laid before both Houses and PAs
➢ The President by order may make amendments or modifications in the law relating to the distribution of revenues between the
FG and PGs (at any time before above order).
➢ The President by order make grants-in-aid of the revenues of the Provinces in need of assistance; and
➢ such grants shall be charged upon the Federal Consolidated Fund
 Natural gas and hydro-electric power
[Article 161]
Prior sanction of President required
to Bills affecting taxation in which
provinces are interested [Article 162]
Provincial taxes in respect of
professions, etc. [Article 163]
Grants out of consolidated fund
[Article 164]
Exemption of certain public property
from taxation [Article 165]
Power of Majlis-e-Shoora
(Parliament) to impose tax on the
income of certain corporations, etc.
[Article 165A]
LEGISLATIVE LISTS Powers of the Federation to legislate
on taxes
(Q1, Q5, Q7, Q8 & Q9(b))
Powers of the Provinces to legislate
on taxes
(Q10)
➢ FED on natural gas levied as well-head and collected by the FG
➢ royalty collected by the FG
➢ not form part of the Federal Consolidated Fund
➢ paid to the Province of the well head
➢ FED on oil levied as well-head and collected by the FG
➢ not form part of the Federal Consolidated Fund
➢ paid to the Province of the well head
➢ net profits earned by the FG / undertaking by FG
➢ from bulk generation of power at a hydro-electric station
➢ paid to the Province of hydro-electric station
➢ Explanation: net profits = revenues - operating expenses (includes taxes, duties, interest, RoI, Dep, obsolescence, overheads and
provision for reserves)
➢ No bill or amendment shall be introduced or moved in the NA except with the previous sanction of the President which
a. imposes or varies a tax or duty the whole /part of the net proceeds is assigned to any province
b. varies meaning of "agricultural income" relating to income tax
c. affects principles of the above provisions where monies are or may be distributable to provinces
➢ PA may by Act impose taxes on persons engaged in professions, trades, callings or employments
➢ within limits fixed by Parliament
➢ no such Act of the Assembly be regarded as imposing a tax on income
➢ The Federation or a Province may make grant for any purpose out of consolidated funds
➢ even purpose is not one with respect to which Parliament or PA may make laws
➢ FG is not liable to taxes by the Act of PA for income or property
➢ PG is not liable to taxes by the Act of Parliament or other PA for income or property
➢ Trade or business is carried by / on behalf of PG outside the Province may be taxed under the Act of Parliament or PA
➢ above does not include imposition of fees for services rendered
➢ Parliament shall have power to make a law for levy /recovery of tax on income of corporations etc established /owned / controlled
/ directly / indirectly by Federal / Provincial law / Government
➢ All proceedings before commencement of Constitution deemed always to be valid and not called to question
➢ Every judgment of any court / tribunal against above deemed to be void and of no effect
LEGISLATIVE LISTS
➢ Duties of customs, including export duties.
➢ Duties of excise, including salt, but not including alcoholic liquors, opium or other narcotics;
➢ Taxes on income other than agricultural income;
➢ Taxes on corporations.
➢ Taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed, except sales tax on
services.
➢ Taxes on the capital value of the assets, not including taxes on immovable property.
➢ Taxes on mineral oil, natural gas and minerals for use in generation of nuclear energy.
➢ Taxes and duties on the production capacity of any plant, machinery, undertaking, establishment or installation in lieu of any one
or more of them.
➢ Terminal taxes on goods or passengers carried by railway, sea or air; taxes on their fares and freights.
➢ Agricultural income tax
➢ Sales tax on services
➢ Taxes on transfer of immovable property
➢ Professional tax
➢ Tax on luxury houses
➢ Tax on registration of luxury vehicles
➢ Property tax