Individual Income Tax

Ameer, M. W. &Mohd, S. (2012). Personal Income Tax Progressivity in Pakistan.

The study aims to analyze the progressivity or repressiveness of personal income taxes in Pakistan. To determine the nature of income taxation, marginal tax rate, suits index and average tax rate are employed. Data for analysis has been taken from Federal Board of Revenue Pakistan. The authors conclude that the personal income taxes are not very progressive and the tax burden is also very low. They suggest that the tax system in Pakistan is progressive. Lower income groups pay lower taxes and higher income groups pay higher tax. The ATR and MTR show that the tax rates of all the income groups are reduced over the years but it is still a progressive system. The authors suggest that the distribution of tax burden in Pakistan is equitable but from 2009 it is going towards inequitable tax burden.

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Ahmed, V. & Donoghue, C. O. (2009). Redistributive Effect of Personal Income Taxation in Pakistan.

The authors aim to study the impact of personal income tax in Pakistan. Income tax is important not only for meeting the government’s expenditure needs but also for reducing inequality. The concept of redistribution in a tax system is not necessarily a static concept, time period over which we measure income and wealth are likely to influence the measures of redistribution and progressivity. The role of personal income taxes has been declining in developing countries however it is still important and can’t be completely discarded. The overall tax system in order to evaluate the contribution of rate, allowances, deductions, exemptions and credits has been decomposed in the study. Data from Household Income and Expenditure survey 2001-2 has been used. The structure given in Income Tax Ordinance, 2001, is applied to gross household incomes in 2002 (low growth year) and 2005 (high growth year). Their findings reveal that the reforms laid down in the Tax Ordinance resulted in a greater redistribution of income. The redistributive effect increases as the analysis moves from 2002 to more recent years. Deductions for salaries tax payers contribute the most towards progressivity. These results contradict results from other countries with advanced taxation systems that rely on allowances followed by tax rate.

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