A Comparison of Fiscal Effort by Provincial Governments in Pakistan

Ijaz Hussain, Sumbal Rana

Abstract


Considerable variation exists among Provinces of Pakistan with
respect to their abilities to raise revenues. This is due to underlying
varied provincial characteristics like area, resources, population,
nature of economic activities and provincial GDPs. The main focus of
this paper is to make inter-provincial comparison of their fiscal
efforts after allowing for difference in taxable capacity. Therefore,
objective of such inter-provincial comparisons of fiscal effort is to
identify whether provincial revenue collection is limited by capacity
(revenue base) or if a province is unwilling to exploit the available
capacity to generate revenues.12 This will enable development of the
appropriate resource mobilisation strategy for each province and help in
enhancing the overall provincial tax revenue to GDP ratio which is
currently below 1 percent of the GDP. This analysis will also help
policy-makers in designing fiscal equalisation formulae for assisting
those provinces which have demonstrated lesser capacity to raise
revenues from their own sources.

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DOI: https://doi.org/10.30541/v49i4IIpp.545-562

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