To : Sir Shahbaz Makhdom

From : Imran Abbasi

Date- 4 – Jan – 2023

Subject : Ethics in Taxation

Ethics In Taxation

Ethics: First we have to describe what Ethics in Taxation is basically ethics is described as ethos which
means character and it is taken from Greek Language concept. Aristotle who was scientist by profession
give the concept of the concept of Ethics. In Ethics we have to follow the temperance second courage and
justice.

Ethics In Perspective of Tax Payers:

A taxpayer have to keep three ethics principle in mind they are very necessary because ethics principle
are depend on these following principle.
Utilitarian Approach: It is an ethical principle which focus on right from wrong because actually
determining outcomes. It says the ethical choices are one that give you great good for great numbers.
Deontology: This principle totally basis on ideas of duty.
Virtues: It is theory that in ethics that describe the concept of moral values are central the concept that
good people always do good thing this virtue theory concept.
Tax Payer Responsibilities:

 The most important thing is that there are enough resources in country that allow everyone to
have good life and decent life and government should make sure these available resources are
distributed correctly, and encouraging people to pay taxes also at greater rates.
 The deontologist approach of tax payer should be describe as a tax payer should establish strict
tax obligation. Given that taxes are involuntary transfer of property, it should be inferred or there
should be no Tax at all. This ethics should focus on that taxes are paid by taxpayer as matter of
duty for using the resources for example if someone using hospital its duty to pay taxes for avoid
becoming a thief.

 Virtue ethics is more useful in ethics of taxation someone use their skills people can be
motivated to use their abilities. Financial benefit can encourage people to use their skills at best
but high taxation can undermines this motivation by reducing home pay. Another example is
charity either in form of the cash or time. If people have more cash available they will give to for
charitable purpose and they also find time from their job for community service. Third virtue if
the independent people should earn this they should not rely on the subsidies. Lowering the tax
rate can more likely to get the independents.

 Tax should be used for different purpose it is obvious what ethicist should think about that law
and order administration and compressive public service like hospital from where we should start.
Utilitarian approach should allow these thing because more goods and service are being
produced. Non-materialistic desire are also being satisfied. Virtue ethics also approve this
because more opportunities are being produced.

 Utilitarian theory has always supported the poor because we are transferring resources giving
from rich to poor people putting them in good position and making them more happier. Virtues
ethics can also be satisfied because we are redistributing it will make poor people happier and
caring less for fortunate itself is virtue voluntary distributing is a great virtue as compare to
forced payment. Deontologist can also approve this idea because it a duty to care for people.

 Taxation is totally basis on all above theories this is the morality of the citizen of Pakistan to pay
taxes and it is responsibility of the government to provide decent life to people. It is responsibility
of the state to establish the merit system and provide all basic necessities to people thus therefore
we are obliged to pay taxes to government.
Conduct of Tax Payer
Tax Avoidance: Tax avoidance is the legal method in which tax is minimized from their income
which they own. For example money making activities for that people hide it from the government.
Establishing the off-shore companies in haven tax.
Tax Evasion: Tax Evasion is described as when individual and business illegally avoiding their taxes
that a criminal charge for this thing they have to pay penalties. For example undeclaring of their
income and capital gains.
 Ethics for Tax Consultants
Following are principle that must be used by Tax Consultants:

 Integrity: In all kind of work and corporate interaction a tax payer should be very
straightforward and honest in all of his wording. Integrity is all being honest and to deal with
fair and truthful words.

 Objectivity: Tax professionals should avoid letting bias, conflicts of interest, or undue
influence from others affect their decision-making processes.

 Professional competence & due care: It is crucial for tax consultant  to maintain their
knowledge and expertise current with new developments in methodology, regulation, and
practise in order to provide effective services to clients and employers. They must adhere to
all technical and professional standards.

 Confidentiality: Tax consultants should preserve confidential information obtained from

commercial and professional contacts and should not leak any information to third party
without permission or if there is any legal or professional duty to do so. Tax professional
should not use the data for own their personal benefit it should be kept confidential.

Ethics For Tax Legislators

Taxation is kind of tool from which national goal of economic development can be achieved by financing
the money of tax to government of Pakistan.

 To defend regional industry from overseas competition by raising import duties.

 To combat the impacts of deflation or inflation.
 Minimize wealth distribution disparities.
 To support innovation and science, provide funding for educational initiatives, or to keep local
forces operating as effectively as possible.
 To put regulations in place that prohibit discrimination against different groups in marketplaces
and companies.
Taxation Canons Definition: Canon are basically the rule they built a good tax system for the country
some canon of taxation are described below:

1. Canon Of Equity: This idea gives social and economic fairness to people. This should be
described as every person can contribute according to their financial capability to government
this is the Equity Canon.
 2. Canon Of Certainty: This canon defines that tax which tax payer has to pay it should be
certain not arbitrary. In certainty canon there should be a justice and equality when paying
taxes.

3. Convenience Canon: This should be defined as tax payments ought to be made in a way
that is convenient for the taxpayers.. A simple tax system stimulates tax payment and raises
tax revenue.

4. Economy Canon: This should be defined as expenses when collecting the taxes should not
be excessive. They should be very normal for efficient economy for good administration.

5. Productivity Canon: A tax system only should be productive when it aiding something to
production this canon implies that a tax system must generate enough revenue not harming
the economic production of country.

6. Elasticity Canon: This canon define that a tax system of country is that much good to
accommodate the needs of whole country it designed in that way when income of people rise
tax collection of country also increase.

7. Flexibility Canon: This canon should be defined as whole tax system of the country is that
much flexible taxes can be easily increase and decreased according to government
requirement. This shows that whenever government want to increase revenue it can be eaily
increased.

8. Canon Of Simplicity: The tax system of the country should be very simple so it easily can
be modified according to needs it should not be complicated which can lead to side effect for
tax system. To put it another way, every tax must be clear and understandable to the general
public to allow for easy calculation by the taxpayer.

9. Canon Of Diversity: This canon simply states that taxation must be dynamic, i.e., there
should multiple, diverse tax systems rather than a single tax system.

Responsibilities of the tax legislators

A society's tax system fits within its entire economic environment since it is a component of that
society's economic organization. No tax system may be deemed good if it does not adhere to the
aforementioned taxation principles. Furthermore, the government should insist that funding public
services should be the main goal of taxes.