CONCEPT OF TAX
Karachi Tax Bar
Association
May 20, 2011
Contact Address:
4th Floor, Central Hotel Building
Civil Lines, Mereweather Road
Karachi - Pakistan
Phone: 021 – 35644872-7
Fax: 021 – 35694573
E-mail: aar@mimandco.com
Presented by:
Ali A. Rahim
Director
CONCEPT OF TAX (General )
WHY TAXATION :-

Every country needs funds

For Running the Government & Establishment

For Defence

For Future Developments Programmes
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CONCEPT OF TAX (General )
TYPES OF TAXATION
• FEDERAL TAX
INCOME TAX
SALES TAX / VAT*
FEDERAL EXCISE*
CUSTOM DUTY*
WEALTH TAX
ZAKAT
• PROVINCIAL TAX
PROPERTY TAX
PROVINCIAL EXCISE
WATER TAX
CUSTOM DUTY
USHER/DHAL/ABIYANA
& A HOST OF
OTHER TAXES
* In certain countries these taxes are imposed on the Provincial / State
Level.
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CONCEPT OF TAX
INCOME TAX (History )
CHINA
HAN. DYNESTY (Ancient) – 10 BC
First known history of imposition of Income tax on earnings – 10% which
was applicable on professionals and salary.
Previously tax used to be levied only on properties (land holdings) and
collected by the respective states of which a percentage was passed on to
the center.
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CONCEPT OF TAX
INCOME TAX (History )
UNITED KINGDOM
In the modern time Income tax was imposed for the first time on income in
1798 to pay for the weapons and equipments to prepare for the “ Napoleon
war”.
This was the first time that the tax went higher with the income going up.
This tax was abolished in 1816.
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CONCEPT OF TAX
INCOME TAX (History )
UNITED STATES
In 1861 (Revenue Act 1861) Income tax was imposed on the income of
citizens for the first time by the U.S government to fund the Civil War in
U.S.A.
This continued till 1894 when 2% Income tax was imposed on income over
US$ 4,000/- per annum.
This brought into the taxation only about 10% of the house hold of U.S.A
This was more like a “fixed tax”.
In 1895, progressive Income tax was imposed for the first time.
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CONCEPT OF TAX
INDIRECT TAX (History )
EQYPT
During the era of the Egyptian Pharaohs a tax was collected by the
government on the usage (consumption) of cooking oil.
The tax collectors were known as “Scribes” and this is the first known
Indirect tax in history.
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CONCEPT OF TAX
INDIRECT TAX (History )
ROMAN EMPIRE
History reveals that a tax was imposed for the first time on all imports and
exports called “portoxia”. This is the first time that the history of Custom
Duty as we now know it, was introduced.
It was collected on sea and land routes.
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CONCEPT OF TAX
INDIRECT TAX (History )
ROMAN EMPIRE
Julius Caesar was the first person to impose what is today known as
“Sales-tax” at 1% of all sales. It was further increased to 4% on sale of
slaves only.
History elaborates that a revolt started in 60 AD in East Anglia British Isles
against in the corrupt tax collectors, and this is the first known corruption in
recorded tax history.
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CONCEPT OF TAX
INDIRECT TAX (History )
ROMAN EMPIRE
Caesar Augustus was the first person to impose the “Inheritance tax” at 5%
on all assets, except gifts to children and spouses.
This was the start of the Inheritance tax, followed by the West and was also
known as “Estate Duty” in certain Countries.
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CONCEPT OF TAX
INDIRECT TAX (History )
ISLAMIC CONCEPT
Islam imposes the followings taxes:(i)
Zakat
(on properties)
(i)
Ushr
(on agricultural land)
(i)
Jaiza
(paid the (Islamic) victors of the war)
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CONCEPT OF TAX
EVOLUTION OF INCOME TAX (History )
UNDIVIDED INDIA
(Contd....)
In 1860 for the first time, a tax was imposed by the British government
known as Income – tax, which was paid by all persons earning over Rs 600/per annum.
This lasted for 5 years.
In 1867 a new “License Act of 1867” was introduced in which every person
earning over Rs. 200/- per annum was liable to pay the tax @ 2%.
Agriculture was exempted.
In 1868 a new Act called “ The Certificate Act 1868” was introduced whereby
the ½ annas taxable limit was raised to Rs. 500 per anum and the rate of tax
was reduced to 1.6 percent.
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CONCEPT OF TAX
EVOLUTION OF INCOME TAX (History )
In 1869 this act was converted into the Income – Tax Act 1869 and one to the
important features was that agricultural income was brought into the
“taxable net”.
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CONCEPT OF TAX
EVOLUTION OF INCOME TAX (History )
Pakistan adopted the Income – tax Act 1922 when it became Independent in
1947 and this act was followed upto 1979 when a new Income – Tax
Ordinance 1979 was promulgated.
The concept of the Income – Tax Ordinance was very much the same as the
Act of 1922 but was brought into a serial order till a new Law called the
Income – Tax Ordinance 2001 was enacted which came into force from 2003.
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CONCEPT OF TAX
EVOLUTION OF INCOME TAX (History )
TYPES OF TAXATION
IN PAKISTAN
PROGRESSIVE TAX
REGRESSIVE TAX
PROPORIONATE TAX
INCOME TAX
SALES TAX
EXCISE TAX
CUSTOM DUTY
SHARE OF TAX
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CONCEPT OF TAX
EVOLUTION OF INCOME TAX (History )
DIFFERENCE BETWEEN OLD ORIDNANCE & ORDINANCE 2001
CONCEPTUAL
i)
ii)
iii)
iv)
Assessee Vs Tax Payers
Assessment Vs Audit
Self Assessment Vs Universal Self Assessment
Assessment Year Vs Tax Year
LAW SPREAD OVER
i)
ii)
iii)
iv)
Income - Tax
Sales - Tax
Federal Excise Duty
Custom Duty
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CONCEPT OF TAX
EVOLUTION OF INCOME TAX (History )
CENTRAL CONCEPTS

Persons
Section 80

Residential Status
Section 81

Resident Individuals
Section 82

Resident Company
Section 83

Resident Association of Persons
Section 84

Associates
Section 85
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