The Odd Fascination with Tax-to-GDP Ratio

Nadeem Haque and Raja Rafi Ullah
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Raja Rafi Ullah: Pakistan Institute of Development Economics

No 2022:78, PIDE Knowledge Brief from Pakistan Institute of Development Economics

Abstract: There has been persistent pressure on successive Pakistani Governments by policymakers, especially those affiliated with multilateral donor agencies, to increase the Percentage Tax-to-GDP ratio. It is true, that the fiscal deficit continues to increase. However, the assumption that it is a tax shortfall that grows the deficit needs to be challenged. Haque (2020 & 2022) and PIDE (2021) have consistently challenged this hypothesis by noting that growing government expenditures arise from its inability to control inefficiencies, losses, and staffing. In addition, the government creates a large number of new agencies often duplicating work and often without regard to funding and cost benefit considerations.

Pages: 4 pages
Date: 2022
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