The impact of Sales Tax on the National Economy of Pakistan

Abstract

This study investigates how Pakistan's national economy is affected by sales taxes. The Value Added Tax (VAT) system and the nation's adoption of it are the main topics. The study focuses on the roles played by the federal government and provincial authorities as it examines the constitutional foundation and legal developments that have defined the sales tax system. The consequences of sales tax on various societal groups, including the wealthy and the poorer classes, are also covered. The effects of a sales tax, especially one enacted via a Value Added Tax (VAT) system, go beyond just raising money; they also affect economic development, equality, compliance, and the creation of public policy. For policymakers to make educated choices that maximize revenue collection, foster sustainable economic development, uphold social equality, improve tax compliance, and sculpt efficient tax policies, they must have a thorough understanding of the various implications of sales taxes. Analysis is also done on the VAT's regressive characteristics and how they affect both vertical and horizontal equity. The investigation of the difficulties and complexities of tax compliance, documentation, and refund procedures continues. In order to improve the efficiency of the VAT system and foster economic growth, the essay continues by outlining the necessity of rationalizing sales tax rates, establishing appropriate thresholds, enhancing audit systems, and streamlining the tax legislation