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Final PPT Taxation KKKKK
Final PPT Taxation KKKKK
org/blog/macroeconomic-benefits-increasing-tax-enforcement-pakistan/
Taxation
• Comprehensive set of legal taxes that firms
are required to pay
• Sales tax
• Excise tax
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0
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Large scale of
Informal
employment
3 Many businesses are not Burden only on the Low tax revenues which
TAXATION
10%
TAX collected from its Gross
Domestic Product on average
28% in
TAXATION
China
TAXATION
NO ENFORECEMNT
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• The remaining two-third are informal firms that
pay few or no taxes each year.
Enforcement and Firm Size
Taxation
• Tax enforcement is strongly related to firm size
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How Entrepreneurs Respond to Higher Tax Rates For
Taxation
Larger Firms
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The Study: Increased Tax Enforcement
Taxation
• What should the government of Pakistan do instead?
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Findings
Taxation
• We simulate a cost reduction of operating in the formal
sector (relative to the informal sector) by 10 percent
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Findings
Taxation
• Government now collects revenues from firms that have shifted
to the formal sector
• Those firms now operate at a larger scale and thus have higher
revenues and profits as part of the tax base
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• Allowing for growth-enhancing investments in infrastructure or
other public investments
Comparative Analysis
Taxation
• We compare this policy change to an alternative that increases
the tax rate by one percent.
• This higher tax rate induces 1 percent of firms to shift from the
formal to the informal sector
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• Lowers GDP per capita by 0.5 percent (due to the investments
forgone by these firms)
Conclusion
Taxation
• Increases in tax enforcement capacity may have substantial
growth impacts in the medium run
• Will also raise revenues, which will likely indirectly increase GDP in
the future due to infrastructure investment
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• Government should further consider increasing tax enforcement
capacity to increase growth
TAXATION
Thank you!
Let us know if you have questions or clarifications.
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