Who Bears the Burden of Federal Taxes in Pakistan?

In: The Pakistan development review: PDR, Band 24, Heft 3-4, S. 497-509

Abstract

The main objective of the tax system of a country is to
generate enough revenue for the government, and it is always desired
that taxes should be such that there is less burden on the poor and more
on the rich. Such an attribute of the tax system becomes even more
desirable for a country like Pakistan where the present distribution of
resources is highly unequal and a large proportion of the population is
living at the subsistence level. As in many other developing countries,
in Pakistan also indirect taxes dominate in terms of their contribution
to total tax revenue. It is argued that indirect taxes arc generally
regressive since they arc levied on consumption, and people in the
lower-income classes devote relatively greater proportion of their
incomes to consumption. In this study, we have tried to estimate the
incidence of the federal taxes on households in different income groups.
We accomplished this by calculating effective tax rates (percentage of
income contributed to taxes) for them.