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Taxation and Development: Evidence from Pakistani Administrative Tax Records
The ability to implement and enforce modern broad-based taxes is often argued to be essential for growth in developing countries. While developing countries all over the world have started to replace traditional revenue sources such as trade taxes by modern broad-based taxes, there is virtually no compelling micro-based evidence on the effects and desirability of such taxes within a less-developed country context. The objective of this research project is to fill this gap in the literature by investigating behavioural responses to income taxation and value-added taxation in Pakistan.
The project benefits from access to administrative micro data covering the universe of tax filers (individuals and firms) for the three main federal taxes in Pakistan:
- personal income taxation
- corporate income taxation
- value-added taxation.
Access to such rich administrative data is unique for a developing country.This data combined with compelling experimental variation in taxes allow for the estimation of behavioural responses to taxes by individuals and firms, including real effects, tax evasion and informality. The empirical findings combined with theoretical modelling will make it possible to address the welfare effects of existing tax and enforcement policies, and to identify the scope for welfare-improving reforms of taxation and enforcement.