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This Chapter contains the summary of the

following chapters of the text book


Chapter #1: Introduction & history of Income
Tax Law
Chapter# 4: Income Tax Authorities
Chapter# 16: Appeals

TAXATION
MANAGEMENT
Chapter No.1: Concepts of taxation & Tax
structure in Pakistan

Concept of Tax & Taxation

Tax:
Compulsory contributions of wealth
levied upon the persons by the state, to
meet the expenses incurred in providing
common benefits to the nation
Taxation Management:

The strategy where by a person manages its


business and other activities in such a way so
as to legally minimize his tax liability, not
through illegal concealments, but through
legal compliance to avail tax credits, rebates,
exemptions, reductions and deductions etc.

Cannons of Taxation

Cannons of Taxation revolve around who will


contribute how much

Simplicity: Tax laws must be simple

Convenience: Tax procedures must be convenient

Certainty: Tax amount must be certain

Judiciousness: Tax system must be just

Benefit: Taxes must be imposed on the beneficiaries

Business friendly: Taxes must encourage business


Capacity to Pay

Horizontal

Equity: Persons having the same income should


pay the same taxes
Vertical Equity: Those who have more income should pay
taxes at high rates whereas those who have low income,
they should pay taxes at lower rates

Types of Taxes

Direct Tax: Burden of taxation is on the person on


whom levied. E.g income tax

Indirect Tax: Burden of tax is shifted by the person


on whom levied to other persons. E.g. sale tax

Proportional Tax: Levied with the same


percentage. E.g. sales tax is levied at the rate of 17%

Progressive Tax: Rate of tax increases as the


income increases. E.g income tax

Value Added Tax: Levied at each stage of value


addition. E.g. sales tax

Fiscal Policy

Strategy adopted by government to collect the


revenue and make the expenditures so that social and
economic stability could be attained

Revenue: Taxes & Tariffs, Internal & External Borrowing,


Penalties & Fines, Aids & Grants, Income from government
owned enterprises, Printing of currency, Sale of state assets
Expenditures: Developmental & Non-developmental
Expenditures, Subsidies, Transfer Paymentslike
Unemployment Allowances, Debt Servicing, Pension,
Defence, Running of government, PSDP

Fiscal Deficit: Expenditures>Revenue


Fiscal Surplus: Expenditures<Revenue
Fiscal Neutrality: Expenditures=Revenue

Different Taxes in
Pakistan

Federal Taxes: Levied by the federal government

Provincial Taxes: Levied by the provincial government

Income tax
Sales tax on goods
Federal Excise Duty
Customs duty
Stamps Duty
Property Tax
Motor vehicle tax
Sales tax on services

Local taxes: Levied by the local government

Toll tax
Municipal taxes

Role of Pillars of the State in taxation


system in Pakistan

iar
c
i
d
Ju
y

Executiv
e

Legislat
ive

Legislature---Parliament

Makes substantive legislation to impose different


taxes in the light of cannons of taxation . E.g.

Income Tax Act of 1922, Income Tax Ordinance 1979, Income Tax
Ordinance 2001

Sales Tax Act 1990

Federal Excise Act 2005

Sindh Revenue Board Act 2011

Sindh Sales Tax on Services Act 2011

Punjab Revenue Authority Act 2012

Punjab Sales Tax on Services Act 2012

Kyber Pakhtunkhah Revenue Authority Act 2013

KP Sales Tax on Services Act 2013

Workers Welfare Fund Ordinance 1971

Executive---Tax Authorities

Administer taxes with efficiency &


effectiveness. E.g. Following Authorities
administer Income Tax, Sales Tax & FED
Finance Minister & Finance Secretary
Revenue Division of Federal Govt.: FBR
Established

under FBR Act 2007, Earlier it was


CBR under CBR Act 1922
Appoints subordinates, determines & transfers
their jurisdictions
Makes rules and issues notifications, circulars,
SROs, clarifications, instructions to lay down
the procedures

Executive---Tax
Authorities

Income Tax Rules 2002


Sales Tax Rules 2006
Sales Tax Special Procedures Rules 2007
Federal Excise Rules 2005

Collects

Sales Tax on Services under


Islamabad Capital Territory (Tax on
Services) Ordinance 2001
Collects Provincial Sales Tax on Services on the
behalf of Balochistan Govt. under Balochistan
Sales Act Ordinance 2000

Executive---Tax
Authorities

Authorities in Field Formations: In 3


Large Taxpayers Units, 18 Regional Tax
Offices & 46 Taxpayer Facilitation Centers,
following tax authorities are practicing
Chief

Commissioner Inland Revenue (Head of


RTO/LTU) Grade 21
Commissioner Inland Revenue (Head of Zone)
Grade 20
Officers of Inland Revenue:

Additional Commissioner Inland Revenue (Sub-Head


of Zone) Grade 19
Deputy Commissioner Inland Revenue (Head of
Unit) Grade 18

Executive---Tax
Authorities

Assistant Commissioner Inland Revenue (Head of Unit)


Grade 17
Inland Revenue Officer (Head of Unit) Grade 16
Inland Revenue Audit Officer (Head of Unit) Grade 16

Staff:

They assist the above officers in field formations

Superintendent Inland Revenue


Inspector Inland Revenue
Auditor Inland Revenue
Upper Divisional Clerk
Lower Divisional Clerk
Notice Server
Daftari
Frash
Sepoy

MEMBER (IR)

CHIEF COMMISSIONER
(LTU/RTO)

HRM
(COMMISSIONER )

IP & TF
(COMMISSIONER )

ADDITIONAL
COMMISSIONER

ADDITIONAL
COMMISSIONER

AC/DCIR

SUPPORT
STAFF

ZONE
(COMMISSIONER)

ADDITIONAL
COMMISSIONER

(AUDIT)

ADDITIONAL
COMMISSIONER
(ENFORCEMENT)

ADDITIONAL
COMMISSIONER
(LEGAL)

AC/DCIR

AC/DCIR

AC/DCIR

AC/DCIR

SUPPORT
STAFF

SUPPORT
STAFF

SUPPORT
STAFF

SUPPORT
STAFF

Executive---Tax
Authorities

Other Authorities:
Directorate

Provides updated technological resources to Tax Department

Directorate

General (Law)

Monitors the legal issues regarding tax matters

Directorate

General (Withholding Taxes)

Monitors the collection of withholding taxes

Directorate

General (Intelligent & Investigation)

Provides information about taxpayers evading taxes

Directorate

General (Training & Research)

Provides training to Tax officers & conducts research into various tax matters

Directorate

General (Internal Audit)

Checks the working of the tax department

Directorate

General (Human Resource Management)

Manages human resources of the tax department

Directorate

General (Information Management System)

General (Research & Development)

Conducts research & development in tax issues

Executive---Tax
Authorities

Provincial Authorities

Sindh Revenue Board


Established

under Sindh Revenue Board Act 2011


Collects Provincial Sales Tax on Services under
Sindh Sales Tax on Services Act 2011
Appoints subordinates, determines & transfers
their jurisdictions
Makes rules and issues notifications, circulars,
SROs, clarifications, instructions to lay down the
procedures

Sindh Sales Tax on Services Rules 2011


Sindh Sales Tax on Services (Withholding) Rules 2011

Executive---Tax
Authorities

Punjab Revenue Authority


Established

under Punjab Revenue Authority Act

2012
Collects Provincial Sales Tax on Services under
Punjab Sales Tax on Services Act 2012
Appoints subordinates, determines & transfers
their jurisdictions
Makes rules and issues notifications, circulars,
SROs, clarifications, instructions to lay down the
procedures

Punjab Sales Tax on Services Rules 2012


Punjab Sales Tax on Services (Withholding) Rules 2012

Executive---Tax
Authorities

KP Revenue Authority
Established

under Khyber Pakhtunkhah


Revenue Authority Act 2013
Collects Provincial Sales Tax on Services under
KP Sales Tax on Services Act 2013
Appoints subordinates, determines & transfers
their jurisdictions
Makes rules and issues notifications, circulars,
SROs, clarifications, instructions to lay down
the procedures

It will use Rules made by FBR until the


promulgation of KP on Sales Tax on Services Rules
& (Withholding) Rules

Judicial---CIR (App), ATIR, HC, SC,


FTO, President of Pakistan

Interpret tax laws to ensure the fair application


thereof
Forums:
Commissioner Inland Revenue (Appeals)
First

Appellate Forum
Subordinate to FBR

Appellate Tribunal Inland Revenue


Second

Court of Appeal
Its members are appointed by Federal Govt.
Makes Rules to lay down procedures e.g. ATIR Rules 2010
Final Fact Finding Authority

Judicial---CIR (App), ATIR, HC, SC,


FTO, President of Pakistan

ATIR

Chairper
son
Account
ant
Member
s

Assistan
t
Registra
rs

High Court

Judicial
Member
s

Registra
r

2nd Highest forum for reference in the point of law

Supreme Court

Highest Forum for reference in the point of law

Judicial---CIR (App), ATIR, HC, SC,


FTO, President of Pakistan

Alternate Dispute Resolution


Constituted by FBR on the request of the taxpayer
Gives recommendations to any forum of appeal to resolve the
matter
Members: Chartered Accountants, Cost Accountants, Advocates,
Income Tax Practitioners, Reputed Taxpayers

Federal Tax Ombudsman


Appointed by President for 4 years
Operates under Federal Tax Ombudsman Ordinance 2000 & FTO
Investigation & Disposal of Complaints Regulations 2001
Gives recommendations on eradication of maladministration

President of Pakistan

The party aggrieved from the recommendations given by the


FTO, may file a representation to the President of Pakistan

Appellate Flow Chart


Alternate Dispute Resolution
Committee
Taxpayer may apply to FBR to
form an ADRC to give
recommendations to the
appellate forum where his case
is under process

Taxpayer can file appeal to CIR


(App) against the order of CIR
within 30 days
Taxpayer & Tax Department can
file Appeal to ATIR against the
order of CIR(App) within 60 days

CIR
(App)
ATIR

Federal Tax Ombudsman


Taxpayer may apply to FTO to
give recommendations to FBR to
eradicate maladministration

In point of law, Taxpayer & Tax


Department can file reference to
HC against the order of ATIR
within 90 days

HC

President of Pakistan
The aggrieved party may file a
representation to the President
of Pakistan against the
recommendations given by the
FTO

In point of Law, Taxpayer & Tax


Department can file appeal to SC
against the order of HC

SC