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Introductory page

Tax project

Group Members
1. 2. 3. 4. 5. 6. Aafaq ahmad Hina sarfaraz Shafqit Ulla Ali raza Asad khan Syaid anam

Group name
Shining stars TOPIC: Tax culture of pakistan

Submitted to: Sir umer zakha.

ACKNOWLEDGMENT We have no words to express our deepest gratitude to Almighty, Compassionate, and Supreme ALLAH, who enable us to accomplish this task. We also invoke peace for HAZRAT MUHAMMAD (S.A.W), the LAST PROPHET OF ALLAH, who is forever a torch of guidance for humanity as a whole. We express our gratitude to our teacher whose teachings have brought us to this stage of academic zenith and very much thankful for his vigilant supervision, intellectual guidance and very kind attitude. This is our final project of Tax and we are very happy that we have completed it in a beautiful manner. It was a very productive practice for our future career as it helps us to know how the organizations and companies are practically running and competing in the modern environment.

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Dedication

We would like to dedicate this project to our Most Respectful Teacher Prof. umer zakha, our Beloved Family, friends and colleagues. Who motivated us on every step of our life and everybody who helps us to full fill this project.

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Contents
Introductory page ......................................................................................................................................... 1 ACKNOWLEDGMENT............................................................................................................................... 3 Dedication ..................................................................................................................................................... 4 Graphic presentation .................................................................................................................................... 6 Suggestion of peoples how to collect tax in Pakistan? ............................................................................... 11 Our own suggestions about improve Tax culture. ...................................................................................... 14 INFLATION ............................................................................................................................................... 15 There are so many reasons of inflation in Pakistan. ........................................................................... 15 Solution to overcome the inflation and make easy for people pays taxes......................................... 15 LESS TRUST ON GOVERNMENT ............................................................................................................... 17 People not trust on government by certain reasons. ......................................................................... 17 Recommendation................................................................................................................................ 17 ALREADY PAID INDIRECT TAX.................................................................................................................. 18 Problems face by the people in indirect tax. ...................................................................................... 18 Solutions.............................................................................................................................................. 18 Awareness about tax. ............................................................................................................................. 19 Recommendation................................................................................................................................ 19 Luxuries life of politicians........................................................................................................................ 20 Recommendation................................................................................................................................ 20 Rich people do not pay tax. .................................................................................................................... 20 Recommendation................................................................................................................................ 20 Corrupt tax policies: ................................................................................................................................ 21 Solution: .............................................................................................................................................. 21 Embarrassment by other people: ........................................................................................................... 22 Solution: .............................................................................................................................................. 22 Harassment: ............................................................................................................................................ 22 Solutions.............................................................................................................................................. 22

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Graphic presentation
Q.1 People do not pay tax because of inflation. Yes = 18/25 No = 7/25

Inflation
80% 60% 40% 20% 0% YES NO Inflation

Q.2

People do not pay tax because they do not trust on government. YES = 20/25 NO = 5/25

TRUST ON GOVT
80% 60% 40% 20% 0% YES NO TRUST ON GOVT

Q.3

People do not pay tax because they already pay tax in the form of indirect tax. Yes = 13/25 NO = 12/25

INDIRECT TAX
52% 51% 50% 49% 48% 47% 46% YES NO INDIRECT TAX

Q.4

People do not pay tax because influential people not pay taxs. YES = 17/25 NO = 8/25

INFIUENTIAL
80% 60% 40% 20% 0% YES NO INFIUENTIAL

Q.5

People do not pay tax because of lack of awareness about tax. YES = 17/25 NO = 8/25

AWARENESS
70% 60% 50% 40% 30% 20% 10% 0% YES NO AWRENESS

Q.6

People do not pay tax because they think that amount is not utilizedin right ways. Yes = 19/25 No = 8/25

TAX NOT UTILIZED IN RIGHT WAY

80% 70% 60% 50% 40% 30% 20% 10% 0% YES NO NOT UTILIZED IN RIGHT WAY

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Q.7 People do not pay tax because of corrupt tax collection policies. YES = 24/25 NO = 1/25

CORRUPT POLICIES.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% YES NO CORRUPT POLICIES.

Q.8

People do not pay tax because of embarrassment by other peoples. YES = 14/25 NO = 11/25

EMBARRASSMENT
60% 50% 40% 30% 20% 10% 0% YES NO EMBARRASSMENT

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Q.9

People do not pay tax because of harassment. YES = 8/25 NO = 17 /25

HARASSMENT
70% 60% 50% 40% 30% 20% 10% 0% YES NO HARASSMENT

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Suggestion of peoples how to collect tax in Pakistan?

Following are the suggestion of people to collect taxes in Pakistan, in most of them want to change in the poor polices of the movement about tax collection, they show their awareness about the tax, they thought government not untied their tax amount in the right way, they think that most of the people those have relations are not paying taxes and to reduce the tax rates as well. 1. Government should follow comet policies and ways to collect amount from people in the form of tax. Clear picture, fair utilization of amount and proofs should. Be given to the general public in order to force them pay tax or to poeticize it.

2. Prepare the strict LAW and collect taxes from land load and aware the people about tax.

3. Government should use proper way to collect the tax.

4. Government should have to work in fever of public that increase their trust on them.

5. Government should finish the corruption about tax from the country.

6. Government should finish the indirect taxes that is difficult for tax payer to pay both.

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7. There should be a proper way of collection taxes for the politicians and form public as well.

8. Government should utilized the tax amount on their better place, people not pay tax because of this, in UK people pay tax happily 40% because they know that amount come back to them in the form of utilities and facilities.

9. Tax collection can be increased in a way that first influential people had to play their role and government should make people realize that their tax will be spend for their betterment.

10. Utilize tax amount for the welfare of the people, they will ultimately pay taxes.

11. Tax is collected when the law of tax collection is ewual for every person rich or poor. But unfortunately the higher authority dont pay tax. When government strictly follow the tax policy then tax is collect.

12. Prepare proper law to aware the people and collect taxes.

13. Collect the tax political and parliament peoples that deserves and prepare proper law.

14. Tax policies should be improved, amount should be utilized on the development of people and country.

15. If the government should utilized the money for the welfare of public. People will pay tax.

16. Control the inflation that is the main reason to not pay tax. And proper law.

17. Conway the public about tax and its future.

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18. Control the tax rate to motivate the public to pay taxes.

19. Control the inflation.

20. Control the high rate of taxes.

21. People required awareness and reliable leadership to utilization of tax amount. And also reduce the penalties amount.

22. Tax to be collected area wise.

23. People have low income so they are not paying tax.

24. Prepare tax collation policies and reliable leadership can collect taxes.

25. Aware people about taxes and it right uses from government side.

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Tax culture in pakistan
Tax culture in Pakistan is undeniably weak. Low tax base, large informal economy, unlimited short filers and non-filers, and lax enforcement of tax laws etc. are the main indicators of the weak tax culture prevalent in our country. Reasons for low levels of voluntary compliance of tax laws and lack of intrinsic willingness to pay taxes are manifold and may vary according to the perceptions of different stakeholders. Arguments can be advanced from political, historical, religious and political economy perspectives.

Pakistan like other developing countries faces the dilemma of low tax base. According to an estimate, 2.4 million people are registered taxpayers out of a total population of 180 million. Majority of the individual taxpayers comprises the salaried class who can be best described as captive taxpayers as they cannot escape the tax net. The number of those who do not file their return is significantly high and the phenomenon of non-filing of tax returns is not restricted to the income taxpayers only. For example, it is estimated that out of 91,139 sales tax registered persons (as of June 2010), 13,236 were sales tax non-filers, a glaring manifestation of weak tax culture, besides lax tax enforcement. Poor public service delivery and availability of better quality substitutes for various public services ( e.g. personal security guard is more reliable than a policeman; visiting a private doctor is better than undergoing humiliation in the public hospital; private schools are better than public schools etc), are also responsible for the weak tax culture. The common perception that corruption is rampant in the government institutions is a big stumbling block in the way of promoting tax culture. People pay taxes voluntarily when they believe that the money collected will be spent on them through better public service delivery and their taxes will be returned to them with a better value. If the quality of public service delivery is low, people have little motivation to pay due taxes. A balanced and an equal tax culture could not be introduced in Pakistan without removing the feudals and tax evaders from the national politics. There is a need to promote accountability and justice to change the approach of the public so that they would bring the changewithconfidence.

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Our own suggestions about improve Tax culture.
INFLATION
Inflation is the one of the important reason regarding tax. So many people not pay taxes because they spend most of their income on purchase their basic needs. Just because of inflation. All the goods are so many expenses. Most of the families have no saving at the end of the month, and if some have they are so much disappointed by the inflation.
There are so many reasons of inflation in Pakistan.

Inflation is at its peak all over the world and there are different reasons for it. In the case of Pakistan, it is the result of monetary phenomenon. The reason is that excess money supply growth in Pakistan has basically enhanced inflation in Pakistan.

In Pakistan the main reason of inflation is the increase in the prices of regular items, such as wheat, sugar, ghee and other items. The government has totally failed to control the prices of these items. Petrol price hikes is the second main cause. When oil prices are increased it affects prices of its complementary goods too. Such as transportation fares, etc. Thirdly, most of the industries are closed due to government policies creating unemployment. Pakistan is a developing country. Inflation is one of the major problems of this country. In fact, it is the root cause of oodles of problems in the country. This is to draw the attention of authorities towards the urgent need of such actions that may decrease the inflation rate in our country. In this way people pay also so many indirect expenses.

Solution to overcome the inflation and make easy for people pays taxes.

Controlling Inflation forms a significant part of the economic activities of a nation. Inflation is an economic condition characterized by a general rise in the prices. Thus, controlling Inflation is important as unrestrained increase of the prices may culminate in Hyperinflation, and

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an excessive fall in the prices may lead to Deflation. Both the situations are not healthy and sound for the overall growth and development of a country's economy. There are so many ideas to overcome the inflation. But one of the best near me is to promote industry. Actually we Pakistani people prefer to sue imported goods and brand. While mean we are not able to afford that in result we have less net profit at the end. Now the question is who we promote our own industry so for that government should play an important role. Government should provide the awareness to our people to use over own goods. Government should promote their own brand by TV ads and other sources. Government should give special aids to the industrials by giving relief in tax rates on their more sales. Government should promote every kind of industry in all over the country. When we make the entire product in over own country that is easy to purchase. And all the industrials should make good quality products when Pakistan is able to produce all basic goods in their own country then we able to increase over exports. When people are able to purchase their basic needs they would pay taxes by their own happiness because they know that about is recover them in the shape of faculties by the government. Whenever we import goods they are so many expensive because first this is devaluation of over currency and it add custom taxes, so many traveling and like this other expenses. So comparatively in this way we overcome the inflation and make easy for the people to pay taxes.

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LESS TRUST ON GOVERNMENT
Yes its true, Pakistani government is not so much cooperative in development of Pakistan. They do not utilize the tax in good way. So thats why many people not interested in tax paying. They know that amount is not return by any service. Infect government have no policies to run the country.
People not trust on government by certain reasons.

Tax is major sources for any government to run their country if government fails to collect the tax than he should get loans to run their system. Same in Pakistan, Pakistani public not pay tax because of most of the reasons like The one of the big reason is not well infrastructure. People see so many difficulties during traveling, no batter savage system, no work on new dams, and no better educationalist institutions if there is they are so rear. They not control inflation day by day the rates of inflation are increasing. They are failing to stop the terrorism in Pakistan. The Politian is only seeing their own benefits. They all rich they do not feel the poor peoples feelings. Even the government fails to provide the basic needs of the life.
Recommendation

Government should make decision for the benefits of public Instead of their own benefits. Government should utilize that amount make and development of Pakistan. Government should improve their infrastructure that play an improve role in the welfare of the country. Due to good roads people travel and pass their goods from one place to another. Government should make more products in low price in Pakistan. It decreases the inflation in Pakistan. Government should make in their defense strong in and outside the country. Government should make their relation with those countries those are censer with Pakistan and our government should prefer to ISLAMI countries. When the government work for the benefit of the people and people know that a tax that we pay is utilize for the benefit of them they pay taxes without any afraid.

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ALREADY PAID INDIRECT TAX

Yes it is the one of the reasons people not pay tax because they pay tax in the form of indirect tax. Indirect taxes are imposed by the government on producers.
Problems face by the people in indirect tax.

The burden of the tax can be passed on to the consumers depending on the price elasticity of demand and elasticity of supply of the product. So people have low incomes so they have burden of paying indirect taxes. The rate taxes of commodities and services are very high thats why the inflation rate is very high so that it is difficult for the people to paying indirect taxes.

Fixed income class suffers from these taxes as process of the products increase and their purchasing power diereses which disturb the economy. There is always a fluctuation in people buying behavior which disturbs the government budgeted income. Difficulty in tax calculation and collection are the drawbacks of indirect taxes. As these taxes start form raw material and the burden keep passing on to the final consumer but if any intermediary manipulate his transaction statistics there will be loss of revenue.
Solutions

Pakistani government imposed heavy indirect tax on the goods. In Pakistan standard rate of indirect tax is 16%. That is so high tax rate. So it is difficult for public to pay is the form of goods purchasing. Because of this Pakistani poor people have to compulsory to purchase low quality products. We are not known about the new inventions and technology. That is the big reason of backwardness of Pakistan. That affects the heavy products of industry. And the government should impose heavy tax on imported products. To collect the money by rich peoples in the form of tax. And make their own product reliable that poor people purchase easily.

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If the industries make chip products and give batter quality government should imposed less tax on them. Or the tax rate is change by product actual value. If the product is heavy then tax is little bit high and if not so tax rate is low.

Awareness about tax.

In this mordren word awareness is no problem. There are so many resources to aware the public about the tax but in pakistan because of high illiterate people.
Recommendation

Literacy of all the developed countries with a strong tax compliance rate is more than 90%. But, unfortunately, it is in 45% in Pakistan. People do not know the importance of paying taxes to the government. They consider it a regressive step by the government to extract money from them. Therefore, tax evasion is not considered a serious crime but their right by a section of the society, especially in the tribal area of North Western Frontier Province (NWFP) and Baluchistan. Government finds it very difficult to enforce the writ of the government in these areas. This is generally associated with the low literacy rate. Government of Pakistan lesson from develop world and improve literacy rate.

Majority of the population is not familiar with the tax laws. Tax education programs initiated by the revenue department can immensely help people understand tax laws and regulations. In the present day electronic media can play a significant role in educating the people in their own language. Like talk shows and TV dramas on the necessity of paying due tax to the government can leave long lasting impression on the minds of the people. It should be known to them that development programs cannot be executed and completed without money in the national treasure and the money in the national treasure comes in the shape of taxes paid by the people doing taxable activities. Tax education my convince people to pay taxes.

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Luxuries life of politicians
The politicians of Pakistan dont bother to pay tax, because there is no one to ask them or to put on the penalty or punish them for this irresponsibility. These are the people from government sectors. They on behalf of their relations, power or position do this.
Recommendation

In Pakistan many people not pay tax because they think politicians use their tax amount on luxuries life so politicians adopt simple life style and leave the luxuries life for Pakistan. In democracy members of the parliament know each time at the time of elections they will have to go to the public and then they will be held responsible for their deeds in the elections. Good policies will return them to the assemblies but bad policies and corruption on their part will throw them away from the assemblies. Pakistan needs to become a true democratic country to face the challenge of collecting all the due taxes from the taxable persons and enforce its tax laws on the entire taxable activities across the board without any distinction.

Rich people do not pay tax.

Like politicians, the elite class also doesnt pay tax as it follow our politicians. They disclose their property. Same is the case with the national & international companies, they show less assets and profits & high liabilities due to this they are free from tax payment.
Recommendation

Implementation of tax laws should be firm, strict and across the board without any distinction. It will not only boost revenue of the country but will also provide equal opportunities to all to grow and compete in a free and fair society. Pick and choose method of accountability adversely affects the country and its people. People lose their trust in the government and stop paying their full taxes to the government because otherwise they cannot survive. Corruption becomes order of

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the day. Therefore, government should make no distinction in an influential minister and a layman in enforcing the laws of the country. Law does not make any such distinction in application and the government should also not make any distinction in the enforcement wherever arises a need. Government of Pakistan create strong audit system and providing great care in selecting accounts for examination will help to measure administrative effectiveness, to induce the voluntary compliance principle, and to obtain direct revenue. GOP should prepare strong audit system for firms. Doing away with the audit of the firms completely gave them free hand. Government of Pakistan should maximum autonomy to the tax administration.

Corrupt tax policies:

The policies of our tax collectors are not correct. They dont pay heed on their jobs & do whatever they want. As they know there is no one to investigate. When plea of leniency is made they for grant them by taking some advantages from them. And some times the mistakes are done py the tax collectors, in tax papers.Everybody makes mistakes, even tax professionals. The key is to make sure you don't end up paying for your tax preparer's mistakes Start with the hiring process. Investigate several potential preparers and thoroughly check out each before you hand over your personal tax documents.Once you're a client, don't take every recommendation at face value. Ask questions and make sure you understand the answers. No mistake in the paper work or other negligence should be avoided.

Solution:

When the tax department is non searces to collect the tax then every body want stole the tax. To solve this problem government should get notes these things and make department to see all these activites and solve the issues.

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Embarrassment by other people:
People felt embarrassment when they pay tax and government not utilized on correct palce and when they say rich and big polititions not pay taxes. These thing embarrass them that why they pay tax when they not recive that amount in the shape of sarveses.
Solution:

The tax gap is increasing, as is the size of informal and underground economy, here is the need to overcome this situation and to have the solution . the best solution for this purpose is that we being the nation of pakistan take the responsibilities. Special check and know how should be made on the payers. People should be bold enough to oppose or insult the people who instead of paying their tax, try to convince not for paying tax. Now at this stage when the running situation or the condition of our beloved country is not so good and we are liable to other countries, here we should realize the worth of this tax. This is the only way to overcome this poor situation.

Harassment:
Most of the people dont pay tax just because Harassment:of like if a person pay tax but the people who are not paying tax embarrasses him for paying it . he being shy or feel guilty that why should he pay as the amount gathered from tax is not being utilized for their welfare. And he, atlast forbids to pay.
Solutions

Government should notes why people harass the other on paying tax. And people not pay tax and harass the other governemt should make a saperet department who just cheak who not pay taxes and collect the tax from them with panality.

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Other recommendation
Improve effectiveness of existing processes through the work reorganization which reduces tax payer/tax collector interface, provides pre-audit anonymity of auditors, assigns and distributes functions and responsibilities in a manner that reduces discretion of assessing officers, promotes one window operation, assigns functional responsibilities to specialized divisions, relieves assessing officers from non-assessment functions, and moves to a systematic basis for selection of cases for tax audit. Develop a system with key features of universal self assessment with selective audit, centralized information system, survey and research capability, functional specialization, taxpayer education and customer service. Initiate education of taxpayers and withholding agents through a well-integrated programme of media campaign, booklets and brochures. Simplify and standardize the process of issuance of exemption certificates. Make the compulsory registration process more systematic. Create a centralized national database, which captures information from sales tax, income tax and customs, utility bills, PTCL, SECP, industrial associations, and state enterprises. The selection of cases to be registered should be automated to reduce discretion. A separate register should be maintained for the same. To facilitate the taxpayer stay of recovery should be allowed on submission of bank guarantee. Create a healthy relationship between the three stakeholders in the taxation system: Government of Pakistan, FBR and taxpayers. Government of Pakistan should create on enabling environment through legal changes

autonomy and effective supervision so as to improve its efficiency and integrity.

Improve FBR credibility with taxpayers through improved organization design and human resource management. Government of Pakistan should maximum autonomy to the tax administration. Expand the coverage of GST to the taxation of professional services.