Reforming Tax

Laws to Encourage
Savings
Group Members:
• Waqar Ahmad
• Abdul Hanan
• Areeb
 What are Taxes and
Tax Law
• Taxes are mandatory payments imposed by
the government on individuals and
businesses to fund public services and
programs. They come from various sources,
including income, sales, and property, and
the amount depends on income,
transactions, and specific tax laws.
•
Tax law comprises the legal rules governing
the imposition and collection of taxes on
individuals, businesses, and entities. It
includes statutes, regulations, and policies
dictating how taxes are assessed, reported,
and paid.
 Current Tax Laws and Impact on Savings
• The current tax laws have a significant impact on savings. High tax rates and
complex regulations can discourage individuals from saving and hinder their
ability to build wealth for the future. It is important to understand the tax rates and
how they affect savings in order to make informed financial decisions.
Tax Bracket Tax Rate Impact on Savings
10% 10% Lower tax rate encourages individuals to save more as they get to keep a
larger portion of their income.
22% 22% Higher tax rate reduces the amount of disposable income available for
savings.
35% 35% Significantly higher tax rate limits the ability to save as a larger portion of
income goes towards taxes.
37% 37% Highest tax rate further reduces the amount of income available for
savings.
 Benefits of Increased Savings
• Increased savings have several benefits for individuals and the economy. These include
financial security, investment opportunities, and economic growth.
Benefits Description
Financial Security Increased savings provide a safety net for unexpected expenses and
emergencies, reducing financial stress and promoting stability.

Investment Opportunities With increased savings, individuals have more capital to invest in
various assets such as stocks, bonds, and real estate, potentially
generating additional income and wealth.

Economic Growth Higher levels of savings contribute to increased capital accumulation,

which can fuel economic growth by funding investments in
infrastructure, research and development, and entrepreneurship.
 Proposed Reforms
• Proposed reforms to tax laws can incentivize savings and promote financial stability. By
implementing these reforms, individuals and businesses will have more opportunities to save and
invest for the future. Some key proposed reforms include lowering tax rates, simplifying tax
codes, and introducing tax deductions for savings.
Reforms Description

Lowering Tax Rates Reducing tax rates on income from savings and investments, encouraging individuals to save more
and earn higher returns.

Simplifying Tax Codes Streamlining complex tax codes to make it easier for individuals and businesses to understand and
comply with tax regulations, reducing the burden of tax compliance.

Tax Deductions for Introducing tax deductions for contributions to retirement accounts, education savings plans, and
Savings other savings vehicles, providing financial incentives for individuals to save for specific purposes.

Capital Gains Tax Exempting capital gains from certain long-term investments from taxation, encouraging long-term
Exemptions investment and wealth accumulation.
Tax Credits for Small Providing tax credits to small businesses that establish retirement plans for their employees,
Businesses promoting retirement savings and financial security.
Potential Challenges • Implementing tax reforms to encourage savings can face several
potential challenges. These challenges include resistance from
and Solutions special interest groups and the need for bipartisan support.
However, there are solutions that can help overcome these
challenges and pave the way for successful tax reform.

Challenge Solution

Resistance from Special Interest Groups Launch public education campaigns to

inform people about the benefits of tax
reforms and how they can improve
savings, countering special interest
influence and gaining public support.
Need for Bipartisan Support Promote bipartisan compromise for
developing tax reform policies, aiming
for support across political spectrums
through finding common ground and
addressing concerns with concessions.
BUT!

Should tax laws be

reformed to promote
and encourage savings?
There are other ways to increase savings
instead of relaxation in taxes.

• Lower Budget Deficit!

• The amount by which a
government exceeds
its income over a particular
period is budget deficit
REASON WHY TAX
REFORMS SHOULD NOT
BE DONE.

• If taxes are reduced, then

government budget deficit will
increase.
• This means revenue collected
by the government will be less
and expenditure of the Gov. is
high then the budget deficit
will increase.
Cont.
• Larger budget deficit will
shift the tax burden to future
generation.
• If there is high
budget deficit this means
the Gov. is taking
loans (DEFICIT
FINANCING)
 DEFICIT
FINANCING

PRINTING OF
GOVERNMENT
ADDITIONAL
BORROWINGS
CURRENCY
Printing of Additional Currency:
• Reduce the buying power.
• Causes inflation

Government Borrowings:
• Will drive up interest rates.
• Credit will be expensive.
Benefits of Lower Budget
Deficit
• Reducing budget deficit will give
the public confidence that Gov.
Will be borrowing less in the future
there by lowering the rate
throughout the economy.

• Which implies taxes imposition

will be less on people.

• This is good because lower interest

rates make it cheaper for people
and businesses to borrow money.
THANK YOU !
ANY QUESTION?