Abstract:
The past two decades have witnessed widespread attempts to reform tax structure in developing countries. As Low-income developing countries are often heavily dependent on different taxes especially income tax, sales and trade taxes, liberalization has clear fiscal consequences. Depending specifically on each country’s particular economic structure, trade regime, political economy, and the relative mix of protective and revenue motives in tax interventions and liberalization can have an important impact on government revenue. The relationship between tax reforms and tax revenue has been debated in the economic literature, especially in the last decade (Greenaway and Milner, 1993). As the relatively small formal sector limits the base for taxes on income, the major reform is to replace trade taxes with sales taxes. To the extent that this has involved rationalisation of taxes, reducing the level and range of tax rates, and a shift away from taxes on international trade, the reforms are likely to have improved economic and collection efficiency(Norman Gemmell & Oliver Morrissey, 2001). Pakistan's tax to GDP ratio is around 13 percent. Less than one percent of the population is effectively subject to
