Shifting and Incidence of Indirect Taxes on Tobacco and Petroleum Products in Pakistan

Mohammad Irfan


Indirect taxes have always occupied a dominant position in the
tax structure of Pakistan. This has worried economists of various
inclinations because of the widespread belief that indirect taxes tend
to be regressive and interfere with efficient resource allocations. The
resource allocations effects of such taxes is not considered in this
paper which restricts itself to an analysis of the incidence of excise
duties on tobacco products and petroleum products. Prior to the levy of
export duties in 1972, two of the most important sources of indirect
taxes were excise and import duties on petroleum and tobacco products.
Together these groups accounted for roughly 60 per cent of excise duty
collec┬Čtions and one third of indirect taxes in 1969-70. Moreover,
additional taxes levied year after year seldom by-pass these two groups.
A detailed analysis of the incidence of these two taxes will, therefore,
constitute a necessary and important feature of the incidence of taxes
in Pakistan.

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