Determinants of Low Tax Revenue in Pakistan

The main purpose of this research paper was to investigate the factors that are responsible for low tax revenue in Pakistan by using time series data for the period from 1997 to 2017.ADF test was applied to check stationarity among variables The autoregressive distributed lag (ARDL) model and Bound Test were applied to analyze the long-run relationships between variables while Error Correction Model (ECM) was used to determine short run relationship between variables. The results of our empirical analysis show that economic growth, political stability and foreign direct investment boosts tax revenue in Pakistan while inflation rate and gross fixed consumption expenditure negatively affect tax collection. People' trust in the government may also increase tax collections.