DefinePK

Abstract

In Pakistan, essential food items are exempted from indirect taxes to avoid any subsequent increase in their prices;, hence, to protect , thuswith the goal of protecting the poor from a regressive tax burden. However, t Taxes on inputs, such as on fuel and energy, however, act as implicit taxes andare transferred to the consumer price of outputs and,, due to cascading effecteffects, and as a result can exert a burden on households. This paper study investigates the incidence or burden of indirect taxes on essential and non-essentialnonessential food items across households in Pakistan. ForTo do so, this , itthe paperwe follows an Input-Output Multiplier input?output multiplier-based approach that allows the measurementing theof the cascading effect of taxes. It employs the latest available edition of the HIES Household Integrated Economic Survey (HIES) 2018-19 in order to observe householdshousehold food expenditures. The paperOur analysis establishes that there is an effective tax even on items that are ostensibly tax-exemptexempted from tax, implying that households pay taxes indirectly even on thesethose items. The incidence of these indirect taxes on essential food items is regressive across all household deciles, and thatthe incidence of indirect taxes on non-essentialnonessential items is progressiveprogressive at high expenditure decilesly associated withbut proportionality in the bottom lower-ranking of householdexpenditure deciles.