An Evaluation Of The Impact Of Corruption On Tax Morale And Taxation In Pakistan

The present study investigates how corruption has affected tax compliance, tax revenues and how different categories of tax have been affected by corruption in Pakistan from 1984 to 2018. As for as corruption and tax compliance is concerned results show that corruption, higher tax burden, inflation and external debt all reduce the tax compliance. Corruption reduces all tax revenues but some taxes are affected greater. The taxes which involve communication among tax authorities and taxpayers (e.g. international trade taxes) are more vulnerable to corruption than other forms of taxation. As for as corruption is concerned results show that public investment increases the corruption while a higher ratio of direct taxes, higher female labour force participation and better governance reduce the corruption. Findings infer that the government need to limit the use of administrative power to impede economic activity in order to reduce the chance of rent-seeking. Good governance plays an important role in reducing corruption. Ensuring institutional checks on authority, having transparency in public investment and improving law and order can build public confidence on the government.