The role of value added tax in the economic growth of Pakistan

Bilal Hassan

International Journal of Public Policy, 2015, vol. 11, issue 4/5/6, 204-218

Abstract: No public policy issue is as important as the structure and level of taxes. In Pakistan, income tax, value added tax (VAT) and trade tax (custom duty) are major sources of tax revenues for balancing government budgets. Nevertheless, VAT is a leading source of tax revenues over the past 15 years. In this paper, an attempt is made to find answer if the empirical evidence exists between VAT revenue growth and economic growth proxy by nominal GDP. Using ordinary least square regression technique, the key outcome from this econometric study is that VAT revenue growth has strong and positive impact on economic growth in Pakistan during the period 1991-1992 to 2011-2012. One percent VAT revenue growth causes 0.24% economic growth. The results of Granger causality test also corroborate the empirical evidence between VAT revenue growth and economic growth during the period under review. Additionally, there is no empirical evidence found between income tax revenue growth and economic growth as well as trade tax revenue growth (custom duty) and economic growth.

Keywords: public policy; tax policy; fiscal deficit; tax principles; value added tax; VAT revenue growth; income tax; trade tax; custom duties; economic growth; Pakistan; ordinary least squares; OLS; econometrics. (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.inderscience.com/link.php?id=70554 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijpubp:v:11:y:2015:i:4/5/6:p:204-218

Access Statistics for this article

More articles in International Journal of Public Policy from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().