Shifting of Indirect Taxes: A Further Study

Indirect taxes—customs duties, sales tax, excise duty and export duty -are an important source of revenue to the Government of Pakistan. These taxes may be changed to bring about changes in production structure and consumption patterns. However, in the case of Pakistan, changes in sales tax and excise duty in particular seem to have been brought about mainly for revenue purposes. In¬direct taxes accounted for 64 percent of the total revenue receipts of the federal Government of Pakistan in the year 1972-73 [ 4 ]. The contribution of indirect taxes to the revenue receipts of the federal government shows some fluctuations, but over all, the share cf indirect taxes does not show any definite trend. Whereas the share of indirect taxes in total revenue receipts is almost constant, there have been important changes in the revenue receipts from different indirect taxes, e.g. sales tax, excise tax and import duties. In the early fifties, excise and sales taxes accounted for 15 percent of the revenue receipts, but they contributed as much as 27 percent of the revenue in the seventies. This shows that sales and excise taxes are emerging as important sources of revenue to the federal Government of Pakistan. In view of the growing importance of indirect taxes in Pakistan it will be instructive to determine who will bear the burden of taxes. Shifting or non-shifting of a tax has an important bearing on the economy.