TAXATION FISCAL MONETARY POLICY OF PAKISTAN (1)

1. TAXATION FISCAL MONETARY POLICY OF PAKISTAN PRESENTED BY GROUP 2 BSMC-2ND SEMESTER AFT SOCIAL SCIENCE

2. Taxation? • It is a means for the government in increasing its revenue under the authority of the law purposely used to promote welfare and protection of its citizens.

3. STRUCTURE OF TAXES REGRESIVE TAX PROGRESSIVE TAX PROPORTIONAL TAX A proportional tax is also called flat tax. Same percentage of income from a person’s low income than from another person’s high income. Larger percentage from a person’s low income then from another person’s high income. A rich man should pay more then a poor person. A larger percentage from high income earners then it does from low income earners,

5. Advantages of taxes The government levies taxes in order to achieve following objectives: • For collection of revenue to run and administer the government. • To use as a tool for implementation of its policies and fair distribution of wealth. • It helps to control inflammation • It utilizes public money in social welfare.

6. Disadvantages of Taxes • It restrict common people to get extra happiness at some extent. • If government misuse tax we don’t have any control on it.

7. Pakistan tax system In Pakistan FEDERAL GOVERNMENT is empowered to collect tax on the persons income. The central board of revenue (CBR) was created on April 1,1924, by the enactment of FBR act 2007 in July the CBR has now become FBR. The chairman FBR being the executive head of the board as well as secetary of the revenue division is responsible for: • Formulation and administration of fiscal policies . • Levy and collection of federal taxes and • Quasi-judicial function of hearing of appeals

8. FBR OUR MISSION OUR VALUES OUR VISION To be modern Progressive Effective Credible organization Enhance the capability of tax system to collect due taxes through modern techniques ,providing tax payer assistance Dedicated and professional work done Integrity Professionalism Teamwork Courtesy Fairness Transparency Responsiveness

10. Fiscal policy Monetary policy

11. Intro to fiscal policy • The Fiscal Policy Statement is being created to comply with Section 6 of the Fiscal Responsibility and Debt Limitation Act of 2005. The Fiscal Policy Statement (FPS) must assess key macroeconomic variables such as total expenditure, total revenues, total fiscal deficit, revenue deficit, and total public debt, according to the Act. The Act mandates that the federal government explain how budgetary indicators align with sound fiscal and debt management principles.

12. Continue.. • Any major discrepancy in taxation, subsidies, spending, administered pricing, and borrowing; the essential fiscal measures and reasoning for any considerable divergence in taxation, subsidies, spending, administered pricing, and borrowing;The most essential macroeconomic indicators are updated;The fiscal strategic priorities of the federal government for the coming fiscal year;To the greatest extent possible, all policy actions made by the Federal Government, as well as all other variables that may have a relevant impact on achieving the targets for economic indicators for that fiscal year as specified in the medium-term budgetary statement, are examined; andAn examination of how the federal government's current policies align with the principles of prudent fiscal and debt management, as well as the goal.

13. Fiscal policy developments • The fiscal policy posture remained growth-oriented, but sensible and sustainable, with an emphasis on debt service reduction, poverty alleviation, and infrastructure investment. Pakistan has made significant fiscal progress in recent years. In 2005-06, the entire budget deficit fell to 3.4 percent of GDP (excluding earthquake spending), down from over 7.0 percent in the 1990s. For the current fiscal year (2006-07), the underlying fiscal deficit is set at 3.7 percent of GDP (excluding earthquake spending), which is somewhat higher than the previous year's deficit (3.4 percent of GDP)*. Higher deficits were intended to fund a larger public sector development programme (PSDP), especially infrastructure projects. To maintain progress, Pakistan must improve its physical and people infrastructure.

14. Continue… • The levels and mix of the government's taxing, spending, and borrowing are all factors in fiscal policy. Fiscal policy addresses the correct role and size of government, as well as the government's role in fostering growth, creating jobs, social development, and redistribution of economic growth gains, the type and scope of public services, and justice between present and future generations. The government's fiscal strategy has both microeconomic and macroeconomic objectives. Improved income and wealth distribution, equitable access to social services, meeting the basic needs of the poor, encouraging investment in public goods, and increasing the efficiency with which the public and private sectors produce goods and services, as well as their responsiveness to consumer needs, are all microeconomic goals. The general state of the economy is addressed by macroeconomic goals, which include national income and output, employment, inflation, and the balance of payments.

15. Continue… • The 2006-07 Fiscal Year's Financial Performance (July-December) The total revenue for fiscal year 2006-07 is estimated to be Rs.1163.0 billion, up 7.0 percent from Rs.1087.0 billion the previous year (2005-06). Tax collection, which accounts for 76.1 percent of total revenue, is estimated to reach Rs.885.7 billion this year, up 15.5 percent from last year. The Central Board of Income (CBR) is responsible for collecting Rs.835 billion in taxes, or 94% of total tax revenue. In comparison to the previous year, the CBR tax collection is predicted to climb by 17.0 percent this year.19. Total revenue for the first quarter of the current fiscal year (2006-07) was Rs.255.7 billion, up 8.1 percent from Rs.236.6 billion in the same quarter last year. Tax revenue was Rs.191.6 billion, rising 20.9 percent from the same period the previous year. Non-taxable income is similar.

16. Monetary policy

17. Monetary policy • Monetary policy is a set of actions that can be undertaken by a nation's central bank to control the overall money supply and achieve sustainable economic

18. Types o monetary policy • There are two main kinds of monetary policy •  contractionary 2. expansionary • Contractionary • This type of policy is used to decrease the amount of money circulating throughout the economy, typically by selling government bonds, raising interest rates, and increasing the reserve requirements for banks

19. Expansionary • An expansionary monetary policy is a type of macroeconomic monetary policy that aims to increase the rate of monetary expansion to stimulate the growth of a domestic economy. The economic growth must be supported by additional money supply

20. objectives of monetary policy • To ensure economic stability at full-employment or potential level of output • To achieve price stability by controlling inflation and deflation • To promote and encourage economic growth in the economy.

21. Tools of Monetary Policy • There are four major tools or instruments of monetary policy which can be used to achieve economic and price stability by influencing aggregate demand or spending in the economy. • ]Open market operations • Changing the bank rate • Changing the cash reserve ratio • Undertaking selective credit controls

22. Advantages of Monetary Policy •  It can bring out the possibility of more investments coming in and consumers spending more • It allows for the imposition of quantitative easing by the Central Bank •  It can lead to lower rates of mortgage payments • It can promote low inflation rates •  It promotes transparency and predictability • It promotes political freedom

23. Disadvantages of Monetary Policy •  It does not guarantee economy recovery • It is not that useful during global recessions • Its ability to cut interest rates is not a guarantee • It can take time to be implemented •  It could discourage businesses to expand

24. The end