Impact of Taxation and Inflation on Economic Growth of Pakistan

The objectives of this research paper is to measure the impact of inflation and taxation on economic growth of Pakistan by using the time series data from 1991 to 2017. The data was collected from World Development Indicators, IMF, Asian Development Bank, Pakistan Economic Survey and State Bank of Pakistan database. Economic growth GDP was dependent variables while independent variables include: inflation rate, tax revenue, unemployment Rate, tax on international trade and gross capital formation. ADF test, Auto Regressive Distributed Lag (ARDL), Bound Test and ECM were applied to determined stationarity, long run and short run relationship between variables. The findings reveal that gross fixed capital formation and tax revenue are positively related to GDP growth while unemployment, tax on goods and services, inflation and taxes on international trade have negative impact on GDP growth. We suggest to control tax evasion and expand tax net.