Taxation is a major national issue in most countries and is often problematic in its imposition, administration and subsequent use. This nature contrasts with its obvious benefits to society. It is a tool for societal development and also a means by which the rewards of development are redistributed. There are however contrasting individual goals for societal development vis a vis personal development. What is clear to all is that taxes are generally unavoidable and are certain. Collected taxes are expected, by residents, to meet their social and development needs.
Tax is derived from the Latin Word “Taxo” which means “I estimate”, The concept of paying taxes and duties is very old and can also be traced to the Islamic era as well. Taxation has expressed itself in different forms, from when it was imposed on cooking oil by Egyptian Pharaohs through to its first imposition in Great Britain by the Roman Empire up to its current forms. Today similar forms of taxes are imposed in different nations and are generally imposed on rewards on additional value created or income earned. It is defined as a compulsory levy made by public authorities for whom nothing is received in return. Common taxes include Income Tax, Capital Gains Tax, Payroll Tax and Value Added Tax (VAT)/ General Sales Tax (GST). Indeed, Taxation has always been a vital part of any modern society. The tax structure of any country plays pivotal role in the country’s economic development. The government levy taxes in order to achieve following objectives:
1. For collection of revenue in order to run and administer the Government
2. To use as a tool for implementation of its policies
3. For Fair distribution of wealth
Tax is described as follows:-
“A tax is a compulsory payment levied by the government on individuals or companies to meet the expenditure which is required for public welfare”.
Taxation is an important tool to meet the needs of the people. Development can be viewed as social, economic and legal. Economic development may be measured by the growth of business activity within a country. This can be achieved, in tax terms, by a tax system that is neutral. A neutral tax system is one that does not distort business activity. Legal development is the establishment of a tax legal regime that encourages both economic and social development. Social development is the redistribution of wealth within a society. The structure of taxation in developing countries is radically different from that of developed countries. About two thirds of the tax revenue in developed countries is obtained from direct taxes, mostly personal income tax and social security contributions. The remaining one-third comes primarily from domestic sales tax.
Taxation system of Pakistan
Like other countries there are two types of taxes prevailing in Pakistan. One is Direct tax and other is Indirect Tax. It is argued that a direct tax is one that cannot be shifted by the tax payer to someone else, whereas an indirect tax can be. A direct tax is primarily on income and is collected directly from taxpayers. And indirect taxes include sales taxes and a well defined mechanism is formulated to deal and collect indirectly etc. The recently released Federal Board of Revenue’s Yearbook 2011-12 shows that net collection stood at Rs1,883 billion with a 20.9 per cent growth over the last year’s figure of Rs1,558 billion. This has been made possible despite a 37.3 per cent increase in refunds/rebates over collection of the previous year. It has also been highlighted that the tax-to-GDP ratio has improved to 9.1 per cent in 2011-12 from the lowest level of 8.6 per cent recorded for 2010-11. It has been claimed that this success story has been possible despite unfavorable circumstances although the assigned target of Rs1,952 billion was missed by 3.5 per cent. There was a positive growth of 22.6 per cent in direct taxes, 27.1 per cent in sales tax and 17.3 per cent in customs duty compared to the previous year. Only federal excise duty has recorded a negative growth of 10.8 per cent compared to 2010-11.
In above illustrated scenario, TheNetwork for Consumer Protection’s (TN) felt sensitize and aims to raise awareness for consumer on taxation for development and Pay Income Tax project will be the vital strategy to have equitable tax regime in the Pakistan. Indeed, TN is working out to bridging the gap between taxpayers and authorities and ending disparities in the system. It will also help enhance the ability of citizen groups, civil society and the private sector to scrutinize public institutions and governments and hold them accountable. The project ‘Pay Income Tax’ is implementing in the Regional Tax Office domain in four districts i.e. Rawalpindi, Chakwal, Attock & Jhelum.
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