Federal Tax Revenue Forecasting of Pakistan: Alternative Approaches

Syeda Um Ul Baneen
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Syeda Um Ul Baneen: Pakistan Institute of Development Economics, Islamabad

No 2023:12, PIDE-Working Papers from Pakistan Institute of Development Economics

Abstract: Every year, there are forecasting errors in Pakistan’s federal tax revenues. From 1970 to 2020, the federal government has significant forecast errors for all types of tax revenues. Using 1970-2014 data, two-thirds of the time, total federal taxes were overestimated by more than five percent (Qasim & Khalid, 2016). Errors in tax revenue forecasts directly affect budget formulation. The consequences of such errors are misleading tax revenue targets leading to wrong allocation of resources resulting in arbitrary cuts at the end of fiscal year such as a cut in development expenditures and/or an increase in the unanticipated debt burden. This, from policy perspectives, have long-run monetary and fiscal effects.

Keywords: Buoyancy Approach; LASSO; Marginal Tax Rate; Tax Revenue Forecasting (search for similar items in EconPapers)
JEL-codes: B26 B41 C13 H20 (search for similar items in EconPapers)
Pages: 18
Date: 2023
New Economics Papers: this item is included in nep-pub
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