Unlocking Pakistan’s Revenue Potential

IMF Working Papers, August 26, 2016

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Unlocking Pakistan’s Revenue Potential

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Bibliographic details

• Authors: Serhan Cevik
• Published: August 26, 2016
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475530506.001

Summary and main findings

• Despite the significant progress in recent years, Pakistan’s tax revenue remains low relative to comparator countries and the tax effort expected for the country’s level of development.
• The paper develops a novel identification strategy to estimate the short-run and long-run elasticities of tax revenue, taking into account the potential endogenity of tax revenue and economic growth.
• The empirical findings indicate that a tax system with low elasticity cannot take full advantage of economic growth.
• Accordingly, unlocking revenue potential is dependent on broadening the tax base, strengthening administration, and rationalizing tax policy across all levels of the general government.

Methodology and analytical contribution

• Introduces a novel identification strategy to estimate short-run and long-run tax revenue elasticities while addressing potential endogenity between tax revenue and economic growth.
• Focuses on tax revenue responsiveness (elasticity) as the mechanism through which growth translates into additional revenues.

Policy implications and recommendations

• Broaden the tax base.
• Strengthen tax administration.
• Rationalize tax policy across all levels of the general government.

Subjects and keywords

• Subject: Corporate income tax, Personal income tax, Revenue administration, Tax elasticity, Tax policy, Taxes, Value-added tax
• Keywords: Africa, Asia and Pacific, boosting tax morale, Corporate income tax, distortionary tax regime, GDP, Global, GST revenue elasticity, increase revenue yield, Personal income tax, real GDP, revenue administration, revenue efficiency, tax, tax bouyancy, tax buoyancy, tax concession, tax efficiency, tax elasticity, tax morale, Tax Policy, tax revenue, tax revenue elasticity, tax series, Value-added tax, WP

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