An Empirical Analysis of Tax Rate and Economic Growth Linkages of Pakistan.

The present study was designed to analyze the long and short-run relationships between tax rate and economic growth of Pakistan. It examined the dynamic effect of tax rate, capital stock, exports, and health expenditures on real GDP per capita by using Johansen's co-integration approach. The time series data were obtained from various sources ranging from 1975-2009. The results showed a negative effect of tax rate on real per capita GDP, thus adverse impacts on the overall economic growth. Other explanatory variables, however, showed positive effects on real GDP per capita. In order to maintain sustained economic growth, tax authorities needs to embrace substantial changes in tax policy aimed at increasing the buoyancy of the tax system. [ABSTRACT FROM AUTHOR]