DefinePK

Research Objective

To empirically investigate the impact of corporate income tax on unemployment in Pakistan and India for the period 2000-2019.

Methodology

The study utilized the Ordinary Least Squares (OLS) regression technique, employing a model similar to Meyer (2018). Variables included Unemployment, Corporate Income Tax, GDP per Hour Worked, Government Expenditure, Foreign Direct Investment Inflow, Working Age Population, and Urban Population. Data was collected from the World Bank, International Labor Organization, Pakistan Bureau of Statistics, and Ministry of Statistics and Programme Implementation India for the period 2000-2022. Unit root tests (ADF), normality tests (histograms), autocorrelation tests, and correlation tests were conducted. A fixed-effect panel regression model was also used for comparative analysis.

Methodology Flowchart

                        graph TD
    A["Data Collection 2000-2022"] --> B["Variable Selection"];
    B --> C["Unit Root Test ADF"];
    C --> D["Normality Test Histogram"];
    D --> E["Autocorrelation Test"];
    E --> F["Correlation Test"];
    F --> G["OLS Regression Analysis"Pakistan & India""];
    G --> H["Fixed Effect Model Analysis"];
    H --> I["Result Interpretation"];
    I --> J["Conclusion & Recommendations"];                    

Discussion

The findings suggest that corporate income tax does not have a significant direct impact on unemployment in Pakistan and India, which contradicts some existing literature. Potential reasons include limited variation in the data over the selected period, the possibility of the tax burden being shifted to consumers, or the impact being masked by other economic factors in these developing economies. The study highlights the importance of demographic variables and suggests that policy makers should focus on creating a favorable business environment and implementing effective fiscal policies to address unemployment.

Key Findings

Corporate income tax has an insignificant effect on unemployment in both Pakistan and India. Control variables such as working age population and urban population showed significant effects. The study found that an increase in government expenditure, FDI inflow, and GDP per hour worked generally had an adverse effect on unemployment in both countries.

Conclusion

Statistically, there is no causal relationship found between corporate income taxation and unemployment in Pakistan and India. The study emphasizes the importance of understanding corporate taxation for improving policies related to business environment and employment levels. It serves as a groundwork for future research with different variables and techniques.

Fact Check

1. Time Period: The study covers the period from 2000 to 2019 for the empirical investigation, with data collected up to 2022.
2. Corporate Tax Rates: Pakistan decreased its corporate income tax to 29% in 2019, while India reduced it to 22% from 30% for existing manufacturing companies and 15% for new ones in the same year.
3. OLS Regression: The study utilized the OLS regression technique to analyze the relationship between corporate income tax and unemployment.

Mind Map