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Are Some Taxes Better for Growth in Pakistan?A Time Series Analysis

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  • Munir, Kashif
  • Sultan, Maryam

Abstract

This study analyzed the impact of taxes on economic growth of Pakistan for the period 1976 to 2014. The study has disaggregated taxes into direct and indirect tax. Indirect tax has further disaggregated into five categories (excise duty, sales tax, surcharges, tax on international trade and other taxes). By applying autoregressive distributive lag framework, study confirmed the existence of long run relationship between taxes and real GDP of Pakistan. Results indicate that in the long run direct tax, taxes on international trade, sales tax and other indirect taxes has positive and significant impact on real GDP. However, in the short run sales tax, tax on international trade and other tax have positive relationship, while excise duty has negative relation with real GDP of Pakistan. The results confirmed that direct tax, sales tax and tax on international trade are pro-growth taxes. Government should increase direct taxes as they have positive and significant impact on economic growth in the long run.

Suggested Citation

  • Munir, Kashif & Sultan, Maryam, 2016. "Are Some Taxes Better for Growth in Pakistan?A Time Series Analysis," MPRA Paper 68828, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68828
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    Cited by:

    1. Kashif Munir & Nimra Riaz, 2020. "Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Pakistan: A Disaggregated SVAR Analysis," Hacienda Pública Española / Review of Public Economics, IEF, vol. 233(2), pages 141-165, June.
    2. Rudra P. Pradhan & Mak B. Arvin & Mahendhiran S. Nair & John H. Hall, 2022. "The dynamics between financial market development, taxation propensity, and economic growth: a study of OECD and non-OECD countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(3), pages 1503-1534, June.
    3. Arvin, Mak B. & Pradhan, Rudra P. & Nair, Mahendhiran S., 2021. "Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 468-489.
    4. Cordelia Onyinyechi Omodero, 2019. "Effect of Apportioned Federal Revenue on Economic Growth: The Nigerian Experience," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(4), pages 172-180, July.
    5. Anwar Rashed Al Quraan, 2020. "General Sales Tax and Economic Growth in Small Open Developing Countries - Evidence from Jordan," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(3), pages 7-15.

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    More about this item

    Keywords

    Economic Growth; Direct Tax; Indirect Tax; ARDL; Pakistan;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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