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Redistributive Impact of GST Tax Reform: Pakistan, 1990-2001

  • Saadia Refaqat

    (Department of Economics and International Development, University of Bath, UK.)

This paper assesses the welfare impact of GST reform on Pakistani households between 1990 and 2001, a period that coincides with major GST reforms that have increased GST contribution to total tax revenue from 15 percent to 42 percent. As well as the tax burden having increased, we find that the distributional incidence has worsened; GST after-reform impact on welfare is proportional as compared to slight progressivity in the before-reform period. Our results, based on distributional characteristics developed by Feldstein (1972) and recently used by Newbery (1995), show that the welfare of the poor households has been reduced due to taxation of items such as sugar, vegetable ghee, and basic fuels, whereas rich households remain comparatively better off because most of the services remain out of GST tax net.

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Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 44 (2005)
Issue (Month): 4 ()
Pages: 841-862

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Handle: RePEc:pid:journl:v:44:y:2005:i:4:p:841-862
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  11. Younger, Stephen D, et al, 1999. "Tax Incidence in Madagascar: An Analysis Using Household Data," World Bank Economic Review, World Bank Group, vol. 13(2), pages 303-31, May.
  12. Saadia Refaqat, 2003. "Social Incidence of the General Sales Tax in Pakistan," IMF Working Papers 03/216, International Monetary Fund.
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