DefinePK

Abstract

The study's main objective was to probe the empirical interaction among both taxation andincome inequality in Pakistan. ADF unit root test, ARDL/ Bound Co-integration test, andDiagnostic Test have been applied to assess time- series from 1979 to 2020. Empirical resultsindicated that tax revenues (TR) and income taxes (TINCOM) in short run have statisticalinsignificant influence on GINI, whereas in long run, they have such a statistical significantnegative consequence. However, in short and long run, taxes on goods and services (TGS)have statistically noteworthy positive outcome on GINI. The current study conclude based onthe results that Tax revenue and direct tax such as personal income tax has a negativestatistically significant impacts implying to reduces the income inequality in Pakistan.Moreover the indirect tax such as TGS has positive statistically noteworthy impacts onincome inequality in Pakistan implying to increase rate of inequality. Thus, indirect taxeswiden the gap between rich and poor in Pakistan.