Pakistan’s tax revenue remains low relative to comparator countries and the tax effort expected for the country’s level of development. This creates significant challenges in providing the much-desired fiscal space to expand growth-enhancing expenditure on infrastructure, education, health care and targeted social assistance. This article estimates both short-run and long-run elasticities of tax revenue in Pakistan over the period 1960–2015 to better understand the evolution of tax revenue in the context of changing economic activity, using a novel identification strategy based on the instrumental variable (IV) approach and an error correction model (ECM) to address concerns about the potential endogeneity of tax revenue and economic growth. The empirical results indicate that both short-run and long-run elasticities of tax revenue are slightly above 1 over the sample period. There is, however, significant variation in short-run and long-run elasticities across subcategories of tax revenue. These findings underscore the need for a concerted agenda of comprehensive reforms at federal and provincial levels aimed at broadening tax bases, strengthening revenue administration and taxpayer compliance, eliminating distortionary and overgenerous tax concessions and exemptions, and rationalizing tax policy in an efficient and equitable manner. JEL: C23, C32, E62, H2, H62, H68

中文翻译：

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释放巴基斯坦的税收潜力

相对于比较国而言，巴基斯坦的税收收入仍然很低，而且对于该国的发展水平而言，税收努力也是预期的。这在提供急需的财政空间以扩大基础设施，教育，保健和有针对性的社会援助方面的增长方面带来了巨大挑战。本文使用一种基于工具变量的新颖识别策略，估算了1960-2015年期间巴基斯坦税收的短期和长期弹性，以更好地了解在经济活动变化的情况下税收的演变（ IV）方法和错误校正模型（ECM），以解决对税收和经济增长的潜在内生性的担忧。实证结果表明，在样本期内，税收的短期和长期弹性都略高于1。但是，跨税收子类别的短期和长期弹性差异很大。这些发现凸显了在联邦和省一级制定协调一致的全面改革议程的必要性，旨在扩大税收基础，加强税收管理和纳税人的依从性，消除扭曲和过大的税收减让和免税以及以有效和公平的方式合理化税收政策。JEL：C23，C32，E62，H2，H62，H68 这些发现凸显了在联邦和省一级制定协调一致的全面改革议程的必要性，旨在扩大税收基础，加强税收管理和纳税人的依从性，消除扭曲和过大的税收减让和免税以及以有效和公平的方式合理化税收政策。JEL：C23，C32，E62，H2，H62，H68 这些发现凸显了在联邦和省一级制定协调一致的全面改革议程的必要性，旨在扩大税收基础，加强税收管理和纳税人的依从性，消除扭曲和过大的税收减让和免税以及以有效和公平的方式合理化税收政策。JEL：C23，C32，E62，H2，H62，H68