NOTES ON TAXATION
Indirect taxes are those where the incidence of taxation is
passed on to ultimate consumer/buyer, for example Custom duty, Sales Tax,
Federal Excise duty.
Direct taxes are those which are paid and suffered
by the same person. Like income tax, wealth tax, capital value tax etc. It is
also called “progressive tax”. Because it is based on the principal of equity
and justice.
We will confine ourselves to
Income Tax and Sales Tax only. You will
see that even in some cases income tax which is direct tax is being collected
in the fashion of indirect tax which negates the spirit of direct tax. It is
called “presumptive tax”
INCOME TAX LAW History / Evolution
-
First
time Income tax introduced in Indo-pak in 1860 for 5 years
-
From 1865
to 1867 no tax on income
-
In 1867
income tax was imposed as License tax and agric income exempt
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In 1869
to 1873 general income tax levied and agric income taxable
-
In 1877
again license tax again revived
-
In 1886
agric income exempted and a schedule of tax enumerated
-
In 1921
All Indian Committee was formed to revise the income tax law and Act of 1922
was promulgated, was adopted by Pakistan Govt in 1947 and remained in force
till 1979
-
After
complete overhauling of law Income tax Ord 1979 was enforced till 30th June 2002 .
-
1979
Ordinance was repealed on 30th
June 2002 and it was replaced by New Income Tax Ordinance 2001.
This was drafted by an Austrian expert for very heavy cost. About 500
amendments have been introduced and process is still continued.
Hierarchy of tax
laws:
The supreme law is the Islamic Shari ate: Any law repugnant
to Sharia is ultra virus/void
Then comes the Constitution of
Pakistan: No law can be promulgated which is against the Constitution. The constitution has empowered the assembly /
president to promulgate law to tax on income.
With this provision of the
constitution the Income tax law was framed. Income Tax Ordinance 2001 having 241 sections consists of 13 chapters and 7 schedules. Each
chapter divided into various parts and each part has various divisions. As per
section 3 this Ordinance overrides any other law for the time being enforce,
which is in contrary to this law.
Components of
Income Tax Law
-
Income
tax Ordinance 2001 (Authority Federal Govt / parliament)
-
Income tax
Rules 2002 (Empowered by -do-)(for implementation)
-
Notifications
by Federal Government
-
Finance
Ordinance / Act
-
Circulars
and Circular letters by CBR -(to
explain the provisions of law)
-
Tax case
laws (ITAT, HC , SC
-Proviso (An exception
to main section or its part)
-Explanation (This is
to further clarify the provision of a section by Federal Government. It cannot
extend the scope of section)
Means: Restrict
meanings to what has been defined.
Includes: In addition
to its original literal meaning; it includes certain other things
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