This is apropos State Bank of Pakistan’s (SBP’s) First Quarterly Report 2020-21 released by it on Tuesday. It has stated, among other things, that “By Contract, faster than anticipated economic revival, which gives the government room to generate more revenues, either by rolling back certain tax concessions or imposing fresh levies, could contain the deficit further.”
I do not know what SBP is actually advocating. The academic literature, about the empirical relationship between taxes and economic growth, however, says something quite different. In my humble opinion, rolling back tax concessions and imposing fresh levies can help contain fiscal deficit but it can also hurt economic growth prospects.
HINA REHAN (KARACHI)
Copyright Business Recorder, 2021