Tax relief for manufacturing and services sectors aid economic recovery from Covid-19 in Pakistan

A group of men in a crowd. They are all wearing masks. One man, in the center of the crowd, wears a blue mask and is the focus of the image.

To help mitigate the negative impact of the Covid-19 crisis, governments at the national and sub-national levels in Pakistan implemented a variety of tax relief measures to benefit individuals and businesses. While tax exemptions and subsidies proved vital during the ongoing health emergency, low tax revenues and slow economic growth made maintaining social protection measures challenging. Further, local governments sought to ensure that only the most vulnerable populations were eligible for tax relief programmes. However, the most effective policy options remained unproven until a team of local PEP researchers conducted a study using macro policy (CGE) modeling techniques. They found that real GDP gains are highest when tax reductions in the manufacturing sector are implemented. The fiscal policies, however, did not improve economic inequalities. 

Research team
Country
Pakistan
Project code
20587

FUNDED BY

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