 It is a cost

 Paid by the Citizens

 To the Government ( F.G, P.G Or Local Govt. )

 To Administer the Affairs of Government; and

 To Provide Civic Facilities like Roads, Railways,

Airports, Electricity, Water, Sewerage, Communication

Systems, Education, Internal Protection, External
Protection and All other facilities as promised in the
Constitution.
 It is the Main Tool of Fiscal Policy.
 Basic Source of Revenue Generation for
Government to meet its Development Expenditure
and run day-to day affairs.
 Reduce Inequalities in the Society through a Policy of
Redistribution of Income and Wealth.
 To Promote, Encourage or Discourage a specific
Economic Activity to achieve rapid social and
industrial development.
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 DIRECT TAX:
 The impact and incidence on the person whom it is
levied.
 The burden cannot be shifted from on person to
another person.
 INDIRECT TAX:

 The impact and incidence is not on the person whom

it is levied.
 It can pass on to the end user/consumer, in that
case it is part of the cost.
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 DIRECT TAX:  INDIRECT TAX:
• Income Tax • Sales Tax (ST)

• Wealth Tax • Federal Excise Duty (FED)

• Property Tax • Customs Duty(CD)

• Professional Tax • Petroleum Development

• Motor Vehicle Tax Levy(PDL)

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 Tax was imposed on ‘Income’ in 1799 for the first time

in Britain.
 Taxes on Trade, Land, Property, or even tax on

Expenditure preceded tax on income.

 The reason for tax on income was to generate revenues

to meet the expenses of Britain’s war against Napoleon.

Hence, it is sometimes said that Napoleon is the “Father
of Income Tax”.

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 Historically, there have been three laws imposing tax
on income in Pakistan:

 Income Tax Act,1922.

 Income Tax Ordinance, 1979.

 Income Tax Ordinance, 2001.

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1. Who levies it? Parliament.
2. Why is it imposed? - Generate revenue for Government
- Redistribution of wealth
- Tool of Fiscal Policy.
- Encourage, Discourage, or
Promote certain Economic Activity.

3. What is taxed? Income of Individual, AOPs and

Companies.
4. Type of tax? Direct Tax.

5. Who pays it? The Person on whom it is levied.

Incidence many not be passed on to
other person.
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1. There should be Income Income (Real & Deemed).

2. There should be a Person. - Individual

-Association of
Person (AOP)
- Company

3. There should be a period Tax Year (period of twelve

months)

4. There should be Pakistan Geographical source of

Source Income Income

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