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Validity of the Value Added Tax in the SAARC Region


  • Anum Saeed

    (Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Adeel Ahmad

    (Department of Management Sciences,COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Khalid Zaman

    (Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan)


Value added tax (VAT) is considered as the reform tax system of the 21st century, which has been implemented popularly in more than 135 countries in the world. In SAARC region, Pakistan was the first adaptor of VAT. It implemented VAT in 1990. The basic objective of the study is to quantify the revenue effect of the value added tax (VAT), in the SAARC region and to check in particular, whether it has proved an effective form of taxation in those countries. It is first shown that a tax innovation, such as the introduction of a VAT boost the revenue ratio of SAARC countries which have adopted VAT and optimizing government to increase the tax ratio. Panel data of SAARC countries from 1995 to 2010 on various macroeconomic factors are obtained to determine the effect of VAT on revenue ratio. The results indicate prosperous set of determinants of VAT adoption as it proves to be a vital instrument to collect tax and enhance revenue ratio. Estimates shows that most of the SARRC countries have adopted value added tax have gained a more effective tax instrument to upgrade their GDP to revenue ratio.

Suggested Citation

  • Anum Saeed & Adeel Ahmad & Khalid Zaman, 2012. "Validity of the Value Added Tax in the SAARC Region," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 143-170, September.
  • Handle: RePEc:rej:journl:v:15:y:2012:i:45:p:143-170

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    References listed on IDEAS

    1. Auriol, Emmanuelle & Warlters, Michael, 2012. "The marginal cost of public funds and tax reform in Africa," Journal of Development Economics, Elsevier, vol. 97(1), pages 58-72.
    2. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
    3. Giesecke, James A. & Nhi, Tran Hoang, 2010. "Modelling value-added tax in the presence of multi-production and differentiated exemptions," Journal of Asian Economics, Elsevier, vol. 21(2), pages 156-173, April.
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    More about this item


    GDP; Value added tax (VAT); Tax ratio; Revenue ratio; SAARC countries;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies


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