Tax Collection in Pakistan: Determinants and Impact on Economic Growth

Purpose: Taxes are the primary source of government revenues. Through taxes, governments can increase the revenues needed for public spending. This study is aimed at investigating the determinants of tax collection and its impact on the economic growth of Pakistan. Design/Methodology/Approach: The secondary data has been taken for the years from 1990 to 2020 from different sources such as the World Bank and Pakistan Economic Survey. The regression analysis has been performed on the collected data. Tax collection is taken as the dependent variable, whereas gross domestic product per capita, exchange rate, import, export, unemployment rate, and inflation rate have been taken as independent variables. Findings: Results indicate a significant impact of GDP per capita, exchange rate, imports and exports on tax collection in Pakistan. Tax collection has a positive and significant impact on economic growth. Implications/Originality/Value: This study highlight the need to frame policies for increasing gross domestic product per capita, controlling inflation and unemployment for greater attraction of taxpayer for the sake of high tax collection. The high unemployment rate and inflation are the main barriers to tax collection and the country's better economic growth. This study will be helpful to related public-sector institutions in improving tax collection in Pakistan and the government should take necessary steps to improve and develop a strong mechanism to collect taxes.