Buoyancy, Elasticity and Stability of Total Tax Revenues: Evidence from Pakistan

Abstract

This study intends to investigate the long and short run buoyancy and elasticity of total tax revenues and also evaluated the stability of TTR in Pakistan using Time Series Data for the period 1979-2015. The study employs Engel-Granger Test and Error Correction Mechanism to calculate the long and short run buoyancies and elasticity. The long run buoyancy for total tax revenue is 0.984 and short run buoyancy for total tax revenue is 0.973 which showed a non-buoyant and inelastic and inefficient tax system in short as well as in long run. The long run elasticity is 0.994 which is also less than unity. The long run elasticity of total tax revenues is greater than long run buoyancy showing that reforms are absolutely not working in raising revenue even the tax reforms have negative impact on the tax. Base to GDP buoyancy (1.017) is greater than tax to base buoyancy (0.967) reveals that along with increase in GDP base is increasing but tax revenue is not increasing.