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Estimating the Federal Direct Tax Buoyancy for Pakistan in Post-1973 Era

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  • Shaikh, Salman

Abstract

This study used the simple co-integration technique to estimate the direct tax buoyancy for Pakistan economy for the 36 year period starting from FY-1974 to FY-2009. The buoyancy estimated was more than unity which represents slight improvement over previous estimates in past studies. The study attributes the improvement to factors such as expansion of tax base, diversification and deepening of manufacturing sector and structural change in the economy with the size of agriculture sector output shrinking as proportion of GDP and the proportion of direct tax increasing in proportion to total taxes gradually. The study recommends certain policy recommendations which include increase in tax base, reduction in tax rates, reducing tax evasion opportunities by taxing all sources of income and by increasing documentation through compulsory show of tax identity in making most material transactions.

Suggested Citation

  • Shaikh, Salman, 2012. "Estimating the Federal Direct Tax Buoyancy for Pakistan in Post-1973 Era," MPRA Paper 42498, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42498
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    File URL: https://mpra.ub.uni-muenchen.de/42498/1/MPRA_paper_42498.pdf
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    Keywords

    Taxes; Fiscal Policy; Public Finance; Tax Buoyancy; Tax Elasticity; Tax to GDP Ratio;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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