Tax Reform for Pakistan: Overview and Effective Taxes for 1975-76

This paper evaluates consequences of taxation policy changes in• terms of effects on government revenue, households and production. It concentrates on derivation and analysis of effective taxes. The revised economy-wide input-output table prepared at the Pakistan Institute of Development Economics has been used to estimate effective taxes and shadow prices. The paper finds that in Pakistan as in other developing countries effective tax rates diverge substantially from nominal tax rates – a fact whose awareness can greatly help the policy-makers in avoiding unintended consequences of government policies.