CAF-2 · Chapter 2
Constitutional Provisions on Taxes MCQs with Answers
15 multiple-choice questions on Constitutional Provisions on Taxes for CAF-2 Taxation Principles and Compliance. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Under the Constitution of Pakistan, tax can only be levied by or under the authority of:
- A) A) The President of Pakistan
- B) B) The Federal Board of Revenue
- C) C) Act of Majlis-e-Shoora (Parliament)
- D) D) The Prime Minister
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Answer: C) C) Act of Majlis-e-Shoora (Parliament)
The Constitution of Pakistan provides that tax shall only be levied by or under the authority of an Act of Majlis-e-Shoora (Parliament).
Question 2
According to the Constitution of Pakistan, all revenues received and loans raised by the Federal Government shall form part of:
- A) A) The Public Account of the Federation
- B) B) The Federal Consolidated Fund
- C) C) The State Bank Reserve Fund
- D) D) The National Finance Commission Fund
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Answer: B) B) The Federal Consolidated Fund
All revenues received by the Federal Government, all loans raised, and all monies received in repayment of any loan form part of the Federal Consolidated Fund.
Question 3
Monies received by or deposited with the Supreme Court of Pakistan are credited to:
- A) A) The Federal Consolidated Fund
- B) B) The Prime Minister's Relief Fund
- C) C) The Public Account of the Federation
- D) D) The Federal Board of Revenue Account
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Answer: C) C) The Public Account of the Federation
Monies received by or deposited with the Supreme Court, or any other court established under the Federation's authority, are credited to the Public Account of the Federation.
Question 4
Which of the following is NOT an expenditure charged upon the Federal Consolidated Fund?
- A) A) Remuneration payable to the President
- B) B) Administrative expenses of the Supreme Court
- C) C) Remuneration payable to the Judges of the Supreme Court
- D) D) Salaries of the general employees of the Federal Board of Revenue
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Answer: D) D) Salaries of the general employees of the Federal Board of Revenue
Expenditures charged upon the Federal Consolidated Fund include the remuneration of the President, Judges of the Supreme Court and Islamabad High Court, Chief Election Commissioner, Auditor-General, and debt charges, but do not specifically list the general salaries of FBR employees.
Question 5
The statement of the estimated receipts and expenditure of the Federal Government for a financial year, laid before the National Assembly, is known as:
- A) A) The Federal Financial Statement
- B) B) The National Finance Award
- C) C) The Annual Budget Statement
- D) D) The Schedule of Authorized Expenditure
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Answer: C) C) The Annual Budget Statement
The Federal Government must lay before the National Assembly a statement of the estimated receipts and expenditure for every financial year, which is referred to as the Annual Budget Statement.
Question 6
Who is required by the Constitution to authenticate the schedule of authorized expenditure by his/her signature?
- A) A) The President
- B) B) The Minister of Finance
- C) C) The Prime Minister
- D) D) The Speaker of the National Assembly
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Answer: C) C) The Prime Minister
The Prime Minister shall authenticate by his signature a schedule specifying the grants made by the National Assembly and the sums required to meet the expenditure charged upon the Federal Consolidated Fund.
Question 7
Who has the constitutional authority to constitute the National Finance Commission (NFC) at intervals not exceeding five years?
- A) A) The Prime Minister
- B) B) The President
- C) C) The Minister of Finance
- D) D) The Chief Justice of Pakistan
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Answer: B) B) The President
Within six months of the commencing day and thereafter at intervals not exceeding five years, the President shall constitute a National Finance Commission.
Question 8
Which of the following is a primary duty of the National Finance Commission?
- A) A) To approve the Annual Budget Statement
- B) B) To make recommendations regarding the distribution of net proceeds of taxes between the Federation and the Provinces
- C) C) To authorize expenditure from the Federal Consolidated Fund
- D) D) To authenticate the schedule of authorized expenditure
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Answer: B) B) To make recommendations regarding the distribution of net proceeds of taxes between the Federation and the Provinces
It is the duty of the National Finance Commission to make recommendations to the President regarding the distribution of the net proceeds of taxes between the Federation and the Provinces.
Question 9
According to Article 160 of the Constitution, what is the rule regarding the share of the Provinces in the National Finance Commission (NFC) Award?
- A) A) It must be exactly equal to the Federal Government's share.
- B) B) It is determined solely by the population of each province.
- C) C) It shall not be less than the share given to the Provinces in the previous Award.
- D) D) It is completely at the discretion of the President with no minimum limit.
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Answer: C) C) It shall not be less than the share given to the Provinces in the previous Award.
The Constitution dictates that the share of the Provinces in each Award of the National Finance Commission shall not be less than the share given to the Provinces in the previous Award.
Question 10
According to the Constitution, the net proceeds of the Federal duty of excise on natural gas levied at the well-head shall be paid to:
- A) A) The Federal Consolidated Fund
- B) B) The Public Account of the Federation
- C) C) The Province in which the well-head of natural gas is situated
- D) D) The National Finance Commission
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Answer: C) C) The Province in which the well-head of natural gas is situated
The net proceeds of the Federal duty of excise on natural gas levied at the well-head shall not form part of the Federal Consolidated Fund and must be paid to the Province in which the well-head is situated.
Question 11
Under the Federal Legislative List of the Constitution of Pakistan, the Federal Government has the power to impose taxes on:
- A) A) All types of income including agricultural income
- B) B) Agricultural income only
- C) C) Income other than agricultural income
- D) D) Transfer of immovable property
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Answer: C) C) Income other than agricultural income
Entry 47 of the Federal Legislative List empowers the Federation to legislate on "Taxes on income other than agricultural income".
Question 12
According to the Federal Legislative List, the Federal Government can legislate and impose taxes on the sales and purchases of goods. However, it CANNOT impose sales tax on:
- A) A) Goods imported into Pakistan
- B) B) Goods manufactured in Pakistan
- C) C) Goods exported from Pakistan
- D) D) Services
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Answer: D) D) Services
Entry 49 of the Federal Legislative List gives the Federation the power to impose taxes on the sales and purchases of goods imported, exported, produced, manufactured, or consumed, except sales tax on services.
Question 13
A Provincial Assembly may impose taxes on persons engaged in professions, trades, or employments. According to the Constitution, such a tax shall NOT be regarded as:
- A) A) A provincial tax
- B) B) An indirect tax
- C) C) A tax on income
- D) D) A professional tax
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Answer: C) C) A tax on income
A Provincial Assembly may impose taxes on persons engaged in professions, trades, callings, or employments, and no such Act of the Assembly shall be regarded as imposing a tax on income.
Question 14
Under the Constitution, which of the following statements is true regarding the taxation of government property or income?
- A) A) The Federal Government is liable to pay provincial taxes on its property.
- B) B) The Federal Government is exempt from taxation under any Act of a Provincial Assembly in respect of its property or income.
- C) C) A Provincial Government is liable to pay Federal taxes on its income earned within the province.
- D) D) Local governments can tax the Federal Consolidated Fund.
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Answer: B) B) The Federal Government is exempt from taxation under any Act of a Provincial Assembly in respect of its property or income.
The Federal Government shall not, in respect of its property or income, be liable to taxation under any Act of a Provincial Assembly.
Question 15
Does the Majlis-e-Shoora (Parliament) have the power to levy tax on the income of a corporation owned or controlled by a Provincial Government?
- A) A) No, provincial corporations are completely exempt from federal taxes.
- B) B) Yes, Parliament has the power to levy tax on such corporations regardless of the ultimate destination of their income.
- C) C) Yes, but only if the Provincial Assembly passes a resolution allowing it.
- D) D) No, only the respective Provincial Assembly can tax its own corporations.
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Answer: B) B) Yes, Parliament has the power to levy tax on such corporations regardless of the ultimate destination of their income.
Majlis-e-Shoora (Parliament) has the power to make a law to provide for the levy and recovery of a tax on the income of a corporation, company, or institution owned or controlled by the Federal or a Provincial Government, regardless of the ultimate destination of such income.