Effects of Taxation on Prosperity and Disparity: Pakistan - A Case in Point

Authors

  • Ghulam Moeen-ud- Din Associate Professor, Department of Economics, PCC, Blue Area, Islamabad, Pakistan.
  • Hasnain Abbas Naqvi Assistant Professor, University of Hafr Al Batin, Kingdom of Saudi Arabia.
  • Muhammad Azhar Khan Assistant Professor of Finance, University of Hafr Al Batin, Saudi Arabia
  • Nadeem Iqbal Associate Professor, Air University, E9, Islamabad, Pakistan

Keywords:

Income Tax, SalesTax, Computable General Equilibrium model, Social Accounting Matrix, Welfare, Inequality, Poverty, Economic Stability

Abstract

This study narrates the impact of increasing direct (income) tax and reducing indirect (sales) tax simultaneously on increasing the level of welfare and dwindling poverty and inequality in Pakistan. For this rationale, latest Social Accounting Matrix (SAM) 2010-11 of Pakistan is driven and Computable General Equilibrium (CGE) modeling technique is adopted to analyze the effects. To analyze the effects of increasing income tax while decreasing sales tax, two trials of simulations 5% and 10% are reported. The outcomes of the analysis present positive effects on welfare of selected major types of households and also positive effects on reducing income inequality as well as poverty in Pakistan. Finally, in light of the results, the analyses advocate that a mix-tax policy can be effective to attain economic stability.

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Published

2022-06-30

How to Cite

Din, G. M.- ud-., Naqvi, H. A. ., Khan, M. A. ., & Iqbal, N. (2022). Effects of Taxation on Prosperity and Disparity: Pakistan - A Case in Point. Pakistan Journal of Social Sciences, 42(2), 341-362. Retrieved from http://pjss.bzu.edu.pk/index.php/pjss/article/view/1094

Issue

Vol. 42 No. 2 (2022): Pakistan Journal of Social Sciences

Section

Articles