Abstract:
This thesis is about Tax laws of Pakistan, Tax authorities and issues related to withholding Tax. Firstly, for the better understanding of topic we have discussed tax laws of Pakistan. Tax laws of Pakistan mainly categorized in two types, laws related to direct taxes which comes under the legal framework of Income Tax Ordinance, 2001. Secondly, there are laws related indirect taxes like Sales Tax Act, 1990, Customs Act, 1969. Author discussed both type of laws with their aim objective. State imposed and collect all these taxes through a tax authorities headed by Chairman FBR and so on, an overview regarding tax collecting authorities has been given in this paper, After it the main issue of this thesis comes which is withholding tax. Brief introduction its pros and cons has been discussed, state imposed this WHT under the umbrella of tax reforms, trying to increase income tax return filers which will ultimately leads towards increase in tax revenue. WHT on banking transactions directly affects the traders and business community so we have discussed long-term effect of this tussle amongst government and business community. Tax collection pays vital role in economic growth, in all developed nations tax to GDP ratio is very high and in Pakistan it’s very low, tax to GDP ratio in Pakistan is 10%. So for enhancing tax net and bringing more people to tax net is the ultimate goal of the government to meet his monetary obligations. We analyzed the effect of tax reforms and after analyzing quantitative data we come to the conclusion that increase in WTH directly boosts the total tax collection. We run SPSS software for our date and with the help of coefficient correlation the result shows the positive relation between WHT and total tax collection. So, therefore, tax reforms in the shape of imposing WHT on banking transaction and bringing undocumented economy into the documented economy will be considered as rightly taken measures in this regard.
