Taxation System Chapter- 01
A tax is regressive
Meaning that the governments takes a larger percentage of a persons income per tax,
while he is receiving a lower income. Rashid ’s salary Rs 100,000 and employer is
deducintg 15% of his salary for tax which is contrary to our given example in number 1.
A tax is progressive
Meaning that the government takes a larger percentage of his salary for tax due to his
high salary. Rashid has a monthly income of Rs. 300,000 and employer deducted 20% of
his salary for tax. The tax amount is proportionately equal to someone’s status in the
society. A rich man should pay more than a poor man.
3 .4 Characteristics of tax laws
Following are major characteristics of a Taxation system:
It is enforced contribution.
Its payment is not voluntary nature, and the imposition is not dependent upon the will of
the person taxed.
It is generally payable in cash.
This means that payment by cheques, promissory notes, or in kind should not be
accepted.
It is proportionate in character.
Payment of taxes should be based on the ability to pay principle; the higher income of the
tax payer the bigger amount of the tax paid.
It is levied (to impose; collect) on income, Person or property.
There are taxes that are imposed or levied on acts, rights or privileges.
It is levied by the state which has jurisdiction over the person or property.
As a general rule, only persons, properties, acts, right or transaction within the jurisdiction
of the taxing state are subject for taxation.
It is levied by the law making body of the state.
This means that a prior law must be enacted first by the Parliament in Pakistan.
It is levied for public purposes.
Taxes or imposed to support the government for implementation of projects and
programs.
Fiscal adequacy
Means that the sources of revenue taken as a whole should be sufficient to meet the
expanding expenditures of the government regardless of business, export taxes, trade
balances, and problems of economic adjustment. Revenues should be capable expanding
or contracting annually in response to variations of public expenditures.
Equality or Theoretical Justice.
Means the taxes levied must be based upon the ability of the citizen to pay.
Administrative Feasibility.
This principle connotes that in a successful tax system, such tax should be clear and plain
to taxpayers, capable of enforcement by an adequate and well-trained staff of public
office, convenient as to the time and manner payment, and not unduly burdensome upon
on discouraging to business activity.
Consistency or Compatibility with Economic Goals.