Are some taxes better for growth in Pakistan? A time series analysis

Kashif Munir and Maryam Sultan

International Journal of Social Economics, 2018, vol. 45, issue 10, 1439-1452

Abstract: Purpose - The purpose of this paper is to analyze the impact of taxes on economic growth in the long run as well as in the short run. Design/methodology/approach - The study uses simple time series model, where real GDP is dependent variable and different forms of taxes are explanatory variables under ARDL framework from 1976 to 2014 at annual frequency for Pakistan. Findings - Direct taxes have positive relation with economic growth in the long run. Sales tax, tax on international trade (tariffs) and other indirect taxes have positive impact on economic growth of Pakistan in the long run as well as in the short run. However, sales tax and other indirect taxes impact negatively on economic growth in the short run after one year because people realize decline in their real income. Practical implications - Government should increase direct taxes by increasing tax base. Indirect taxes usually indicate negative impact after one and two years; therefore, government should decrease its reliance on indirect taxes. Government should promote tax awareness among the people which increase the tax morale of people and increase the tax base. Originality/value - Taxes are disaggregated into direct and indirect taxes, while indirect taxes have been further disaggregated into excise duty, sales tax, surcharges, tax on international trade and other indirect taxes. This study provides useful insight for policy makers in designing taxes and their effect on growth.

Keywords: Pakistan; ARDL; Economic growth; Direct tax; Indirect tax (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
Working Paper: Are Some Taxes Better for Growth in Pakistan?A Time Series Analysis (2016)
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:eme:ijsepp:ijse-09-2017-0416

DOI: 10.1108/IJSE-09-2017-0416

Access Statistics for this article

International Journal of Social Economics is currently edited by Professor Terence Garrett

More articles in International Journal of Social Economics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().