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Elasticity and Buoyancy of the Tax System in Pakistan

Author

Listed:
  • Faiz Bilquees

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

This paper examines the elasticity and buoyancy of the tax system for the period 1974-75–2003-04. The elasticity of the total tax revenue both with respect to the total GDP and the non-agricultural GDP base is less than unity. Overall, sales tax takes the lead by way of improving revenues. The high coefficient of income tax inclusive of withholding tax, which is an indirect tax, is high. Excluding the withholding tax leads to a lower coefficient. Sales tax with respect to imports and manufacturing also takes care of loss of revenue due to lowering of tariff and excise duties. However, the sales tax coefficient with respect to the GDP base reflects the inclusion of service sector and utilities in the sales tax net, which has serious implications for the poor. The estimates of buoyancy suggest that tax changes did not lead to significant revenue augmentation. The low buoyancy of income tax exclusive of the withholding taxes implies that imposition of massive withholding taxes coupled with an increase in the taxable income limits is working at cross purposes.

Suggested Citation

  • Faiz Bilquees, 2004. "Elasticity and Buoyancy of the Tax System in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(1), pages 73-93.
    • Handle: RePEc:pid:journl:v:43:y:2004:i:1:p:73-93
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    File URL: http://www.pide.org.pk/pdf/PDR/2004/Faiz%20Bilquees.pdf
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    References listed on IDEAS

    as
    1. Mohammad Zubair Khan, 1973. "The Responsiveness of Tax Yield to Increases in National Income," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 12(4), pages 416-432.
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    Cited by:

    1. Nepal Rastra Bank, 2017. "Elasticity and Buoyancy of Taxation in Nepal: A Revisit of the Empirical Evidence," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 29(1), pages 19-32, April.
    2. Richardson Kojo Edeme & Chigozie Nelson Nkalu & Benedict Azu & Sylvernus Chinedu Nwachukwu, 2016. "Alternative Specification and Estimation of Tax Revenue-Gross Domestic Product Relationship," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 4(3), pages 134-141, September.
    3. Audi, Marc & Ali, Amjad & Roussel, Yannick, 2021. "Measuring the Tax Buoyancy: Empirics from South Asian Association for Regional Cooperation (SAARC)," MPRA Paper 109567, University Library of Munich, Germany.
    4. Kashif Munir & Nimra Riaz, 2020. "Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Pakistan: A Disaggregated SVAR Analysis," Hacienda Pública Española / Review of Public Economics, IEF, vol. 233(2), pages 141-165, June.
    5. Ghulam Sarwar & Zahid Ullah Khan & Ahmad Saeed & Muhammad Sarfraz, 2023. "Fiscal Consolidation and Income Inequality Nexus: Evidence from Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 287-292.
    6. Shaikh, Salman, 2012. "Estimating the Federal Direct Tax Buoyancy for Pakistan in Post-1973 Era," MPRA Paper 42498, University Library of Munich, Germany.
    7. Abdul Qadir Patoli & Tayyab Zarif & Nadeem A. Syed, 2012. "Impact Of Inflation On Taxes In Pakistan: An Empirical Study Of 2000-2010 Period," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 8(2), pages 8-4.
    8. Manamba Epaphra & Lucas E. Kaaya, 2020. "Tax Revenue Effect of Sectoral Growth and Public Expenditure in Tanzania: An application of Autoregressive Distributed Lag Model," Romanian Economic Business Review, Romanian-American University, vol. 15(3), pages 81-120, September.
    9. Manjón Álvarez, Adrián M., 2018. "Elasticidades tributarias dinámicas: evidencias a corto plazo y largo plazo en Bolivia (1990-2018)," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB) "San Pablo", issue 31, pages 100-134, May.
    10. Abdul Qadir Patoli & Tayyab Zarif & Nadeem A.Syed, 2012. "Impact Of Inflation On Taxes In Pakistan: An Empirical Study Of 2000-2010 Period," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 8(2), pages 31-41.
    11. A Shikongo & A Shikongo & O Kakujaha-Matundu & T Kaulihowa, 2019. "Revenue Productivity of the Tax System in Namibia: Tax Buoyancy Estimation Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 11(2), pages 112-119.
    12. Nepal Rastra Bank & Nepal Rastra Bank, 2018. "Macro Modeling Practices at Nepal Rastra Bank," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 30(1), pages 1-18, April.

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    More about this item

    Keywords

    Taxation; Tax Revenues Pakistan;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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