Redistributive effect of personal income taxation in Pakistan
AbstractThis paper studies the redistribution effect of personal income tax in Pakistan. We decompose the overall tax system in order to evaluate the contribution of rate, allowances, deductions, exemptions and credits. The structure given in Income Tax Ordinance, 2001, is applied to gross household incomes in 2002 (low growth year) and 2005 (high growth year). Our findings reveal that the reforms laid down in this Ordinance resulted in a greater redistribution of incomes. The redistributive effect increases as we move from 2002 to 2005 tax assessment. Deductions for salaried tax payers contribute the most towards progressivity. This is different from countries with advanced taxation systems relying mainly on allowances followed by tax rate and exemptions.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16700.
Date of creation: 03 Jul 2009
Date of revision:
Publication status: Published in Pakistan Economic and Social Review 1.47(2009): pp. 1-17
Income Taxation; Microsimulation; Redistribution; Inequality;
Other versions of this item:
- Vaqar Ahmed & Cathal O'Donoghue, 2009. "Redistributive Effect of Personal Income Taxation in Pakistan," Working Papers 0143, National University of Ireland Galway, Department of Economics, revised 2009.
- D3 - Microeconomics - - Distribution
- D6 - Microeconomics - - Welfare Economics
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-16 (All new papers)
- NEP-CMP-2009-08-16 (Computational Economics)
- NEP-CWA-2009-08-16 (Central & Western Asia)
- NEP-PBE-2009-08-16 (Public Economics)
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