The Relation of Indirect Tax Changes to Price Changes in Pakistan

This study examines the effects of indirect taxes on prices in Pakistan. It is not a thorough study of the incidence of indirect taxes. It is an attempt to determine the relationship between changes in indirect tax rates and price changes. There have been several changes in the rates of sales and excise taxes in Pakistan in the past few years. The standard rate of sales tax was increased from 10 per cent to 12.5 per cent in 1960, and to 15 per cent in 1963. The rates of excises have been modified from time to time. It should be of great practical interest to see whether these taxes have been shifted to consumers or borne by producers and sellers. Since one study of the effect of import duties on domestic prices of imports has been done recently in the Pakistan Institute of Development Economics |4], and further study of that aspect of the matter is going on, this study covers only sales and excise taxes.