The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Despite the significant progress in recent years, Pakistan's tax revenue remains low relative to
comparator countries and the tax effort expected for the country's level of development. In
light of the potential endogenity of tax revenue and economic growth, this paper contributes
to the literature by developing a novel identification strategy to estimate the short-run and
long-run elasticities of tax revenue. The empirical findings indicate that a tax system with low
elasticity cannot take full advantage of economic growth. Accordingly, unlocking revenue
potential is dependent on broadening the tax base, strengthening administration, and
rationalizing tax policy across all levels of the general government.