Redistributive effects of fiscal policy across the income groups in the urban-rural areas of Pakistan.
Shirazi, Nasim Shah ; Ilyas, Muhammad ; Ahmad, Mehboob 等
I. INTRODUCTION
There exist a large number of studies related to the estimates of
government budgetary redistributive effects and its related problems
with regard to different countries of the world. (1) Studies of the
impacts of government expenditures and taxes in Pakistan have been
conducted within the framework of either incidence of taxes or the
impact of expenditures across the income groups. The studies carried out
by Azfar (1972); Jeetun (1978); Alauddin and Raza (1981) Malik and Saqib
(1985, 1989) cover different aspects of taxation-tax incidence,
progressivity or regressivity of the tax system across the income
groups/individuals and regions. These studies did not discuss the
expenditure side of the budget. Shirazi (1996) analysed the impact of
government transfer programmes (Zakat and Ushr) across the income
deciles. Ghaus (1989) studied the incidence of provincial and municipal
government service-related expenditure benefits in Karachi metropolitan
and therefore, the scope of her study was limited to one city only.
Despite the existence of a rich bibliography on the subject of
government redistrbutive budgetary effects and its related problems, no
study is available which covers the overall redistributive impacts of
government budgetary policy in Pakistan. This study explores the impacts
of government expenditures and taxes on the distribution of income
across various income groups along with net fiscal impacts in the
urban-rural areas of Pakistan. The rest of our study is organised as
follows. In the following section, Part II, we describe the methodology
and data set. In Part III, the results of the study are presented. The
Part IV concludes the paper.
II. METHODOLOGY AND DATA SET
To determine tax burden and benefits received from public
expenditures by various income groups, it is necessary to know incomes
of the households before public expenditures and taxes (pre-fiscal
income). Following Bishop (1966), we used net national product (NNP) as
the income base to estimate the effects of government expenditures and
taxes on the income distribution. Our study aims at urban-rural
decomposition and the urban-rural breakdown of NNP, taxes and government
expenditures data are not available, therefore, we have decomposed the
NNP, taxes and expenditures into urban-rural areas by using different
weight system. Share of urban and rural households in NNP have been
calculated by using population weights and income weights."
Decomposition of NNP
NNP (urban) = [[[alpha].sub.i] [[eta].sub.i]/ [[alpha].sub.i]
[[eta].sub.i] + [[alpha].sub.j], [[eta].sub.j]] NNP
NNP (rural) = [[[[alpha].sub.j], [[eta].sub.j] / [[alpha].sub.i],
[[eta].sub.i] + [[alpha].sub.j], [[eta].sub.j]] NNP
Where
[[alpha].sub.i] = Population weight (urban)
[[alpha].sub.j] = Population weight (rural)
[[eta].sub.i] = Income weight (urban)
[[eta].sub.j] = Income weight (rural).
Decomposition of Expenditures
We have used the following weight system (3) to distribute various
heads of government expenditures across the urban-rural areas.
Educational expenditures have been distributed between urban-rural areas
by taking into account their literacy and population differences.
Educational expenditures (urban) = [[[alpha].sub.i]
[[??].sub.i]/[[alpha].sub.i] [[??].sub.i] + [[[alpha].sub.j]
[[??].sub.j]] [TG.sup.Ed]
Educational expenditures (rural) = [[[[alpha].sub.j]
[[??].sub.j]/[[alpha].sub.i] [[??].sub.i] + [[alpha].sub.j]
[[??].sub.j]] [TG.sup.Ed]
Where
[TG.sup.Ed] = Total government expenditures on education
[[??].sub.i] = Literacy weight (urban)
[[??].sub.j] = Literacy weight (rural)
Health expenditures (urban) = [[[alpha].sub.i] [[lambda].sub.i]/
[[alpha].sub.i] [[lambda].sub.i] + [[alpha].sub.j] [[lambda].sub.j]]
[TG.sup.H]
Health expenditures (rural) = [[[alpha].sub.j] [[lambda].sub.j]/
[[alpha].sub.i] [[lambda].sub.i] + [[alpha].sub.j] [[lambda].sub.j]]
[TG.sup.H]
Where,
[TG.sup.H] = Total expenditures on health
[[lambda].sub.i] = Density weight (urban)
[[lambda].sub.j] = Density weight (rural).
Defense expenditures have been distributed between urban-rural
areas keeping in view their population weights and income weights.
Government expenditures on defense directly benefit the employees of
armed forces. However, indirectly all members of the society enjoy the
benefits in terms of security of their lives and wealth. The expressions
to divide government expenditures on defense into their urban-rural
counterparts are presented below.
Defense expenditures (urban) = [[[alpha].sub.i] [[eta].sub.i]/
[[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j] [[eta].sub.j]]
[TG.sup.D]
Defense expenditures (rural) = [[[alpha].sub.j] [[eta].sub.j]/
[[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j] [[eta].sub.j]]
[TG.sup.D]
Where
[TG.sup.D] = Total government expenditures on defense.
To distribute agriculture expenditures between urban-rural areas we
take into account their population weights, income weights and food
weights. Hence we have incorporated in the weight system the influence
of population share, average income and the availability of agriculture
food for the households belonging to urban-rural areas.
Agriculture expenditure (urban) = [[[alpha].sub.i] [[eta].sub.i]
[[delta].sub.i]/ [[alpha].sub.i] [[eta].sub.i] [[delta].sub.i] +
[[alpha].sub.j] [[eta].sub.j] [[delta].sub.j]] [TG.sup.Ag]
Agriculture expenditure (rural) = [[[alpha].sub.j] [[eta].sub.j]
[[delta].sub.j]/ [[alpha].sub.i] [[eta].sub.i] [[delta].sub.i] +
[[alpha].sub.j] [[eta].sub.j] [[delta].sub.j]] [TG.sup.Ag]
Where
[TG.sup.Ag] = Total government expenditures on agriculture
[[delta].sub.i] = Food weight (urban)
[[delta].sub.j] = Food weight (rural).
General administration expenditure (urban) = [[[alpha].sub.i]
[[eta].sub.i]/ [[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j]
[[eta].sub.j]] [TG.sup.GA]
General administration expenditure (rural) = [[[alpha].sub.j]
[[eta].sub.j]/ [[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j]
[[eta].sub.j]] [TG.sup.GA]
Where
[TG.sup.GA] = Total expenditures on general administration.
Interest expenditures have been divided into their urban-rural
counterparts by using population weights and income weights of
urban-rural areas. The households receiving the interest are the direct
beneficiaries of the government expenditures on interest. However, via
investment and employment generation benefits may be transferred to
other individuals in the society according to their income. Hence it is
assumed that the interest expenditures of the government should be
divided between urban-rural areas in proportion to their populations and
average incomes of the households.
Interest expenditure (urban) = [[[alpha].sub.i] [[eta].sub.i]/
[[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j] [[eta].sub.j]]
[TG.sup.I]
Interest expenditure (rural) = [[[alpha].sub.j] [[eta].sub.j]/
[[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j] [[eta].sub.j]]
[TG.sup.I]
Where
[TG.sup.I] = Total expenditures on interest.
Decomposition of Taxes
Direct tax burdens have been distributed between urban-rural areas
keeping in view their income and property tax shares in the average
monthly expenditures per household. To divide total indirect tax burden
between urban-rural areas we have taken into consideration the
population weights and the consumption weights of these areas. As the
burden of indirect taxes, according to the standard incidence
assumption, falls on the consumption of the households and thus on their
number.
Indirect tax (urban) = [[[alpha].sub.i] [[beta].sub.i]/
[[alpha].sub.i] [[beta].sub.i] + [[alpha].sub.j] [[beta].sub.j]]
[TT.sup.IT]
Indirect tax (rural) = [[[alpha].sub.j] [[beta].sub.j]/
[[alpha].sub.i] [[beta].sub.i] + [[alpha].sub.j] [[beta].sub.j]]
[TT.sup.IT]
Where
[TT.sup.IT] = Total indirect taxes
[[beta].sub.i] = Consumption weight (urban)
[[beta].sub.j] = Consumption weight (rural).
Total import duty has been distributed between urban-rural areas by
taking into account their population weights and expenditure weights.
Import duty (urban) = [[[alpha.sub.i] [[gamma].sub.i] /
[[alpha.sub.i] [[gamma].sub.i] + [[alpha.sub.j] [[gamma].sub.j]]
[TT.sup.M]
Import duty (rural) = [[[alpha.sub.j] [[gamma].sub.j] /
[[alpha.sub.i] [[gamma].sub.i] + [[alpha.sub.j] [[gamma].sub.j]]
[TT.sup.M]
Where
[TT.sup.M] = Total import duty burden
[[gamma].sub.t] = Expenditure weight (urban)
[[gamma].sub.j] = Expenditure weight (rural).
To distribute total export duty between urban-rural areas of
Pakistan, we have taken into account population weights and income
weights of these areas.
Export duty (urban) = [[[alpha].sub.i] [[eta].sub.i]/
[[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j] [[eta].sub.j]]
[TT.sup.X] Export duty (rural) = [[[alpha].sub.j] [[eta].sub.j]/
[[alpha].sub.i] [[eta].sub.i] + [[alpha].sub.j] [[eta].sub.j]]
[TT.sup.X]
Where
[TT.sup.X] = Total export duty burden.
The following method, given in Reynolds and Smolensky (1977) has
been used to find out the net fiscal incidence.
c = m + gB - xT (4)
c = the post-fiscal or final income vector, order l x k;
m = the initial or factor income vector, order l x k;
g = a vector of government expenditures by category, order 1 * h;
B = a matrix of percentage distributors for government
expenditures, order h x k.
x = a vector of government tax receipts by category, order l x n;
T = a matrix of percentage distributors for government taxes, order
n x k.
Allocation Criteria
(a) NNP has been distributed (urban-rural) across various income
groups by using the percentage income distribution given in Household
Integrated Economic Survey [HIES (1992-93)].
(b) Government Expenditures
To distribute government expenditures (urban-rural) among the
income groups, we have used the HIES (1992-93) data and main skeleton of
the assumptions used by Thepthana (1979). Two-third benefits of the
government expenditures in education have been allocated as per
household income while, one-third as per number of households. Health
expenditures benefits are allocated as per the number of households in
each income brackets. This is due to the supposition that each member of
the class from poorer to richer enjoys the benefits of government health
expenditures almost the same.
To allocate defense expenditures, we have distributed half on the
basis of households incomes and half on the number of households. As
defense forces and related people directly benefit from these
expenditures and other members of society also benefit from government
defense expenditures in terms of their safety of lives and wealth. In
case of general administration expenditures, the social incidence cannot
be clearly shown. Therefore, these expenditures are arbitrarily
distributed; one half by the number of households and one half by the
household income. Whereas, in case of agricultural expenditures of the
government, we have allocated half on the basis of households income and
half on the basis of their numbers in each income group. The benefits of
interest expenditures are allocated in proportion to households'
income in each income group.
(c) Tax Burdens (5)
The burden of income and corporate taxes has been distributed among
different income groups according to their expenditures on these taxes
(as these can not be shifted). Similarly burden of the property tax has
been distributed among different classes according to the payment of
this tax by the property owners. Indirect taxes, like sales tax and
excise tax, are assumed to fall on the consumption of households. Import
duties have been distributed according to household expenditure, whereas
export duties have been distributed with respect to total household
income of different income groups.
The Data Set
We have largely used the data given in Household Integrated
Economic Survey [HIES (1992-93)] and Economic Survey (various issues).
As far as its geographical coverage and scope is concerned, the universe
of HIES comprises all rural and urban areas of Pakistan defined as such
in the 1972 and 1981 Population Census, with the exception of Federally
Administered Tribal Areas (FATA), special areas of Peshawar and D.I.
Khan divisions, military restricted areas and districts of Malakand,
Kohistan and Chitral (Protected Area) in the N.W.F.P. The size of the
sample was 14976 units. Keeping in view the sample size of the survey,
we decomposed our analysis to the urban-rural breakdown and ignored the
regional analysis.
III. RESULTS
Fiscal Incidence in Urban Areas of Pakistan
The results of fiscal incidence in urban areas for the 1992-93 are
presented in Table 1 (6) and the results related to rural areas are
depicted in Table 2. (7) Column 2 of Table 1 shows the pre-fiscal income
of each income group, while columns 3 and 4 show the amount of
expenditure benefits and tax paid respectively across various income
groups in the urban areas of Pakistan. The expenditure benefits across
income groups, increase up to 4th income group, falls in the 5th income
group (Rs 7172 million) and then rise again in the 6th income group (Rs
7605 million). The 7th Income group has a lower expenditure benefits
than 6th one. However, the 8th income group receives the larger
expenditure benefits (Rs 11984 million) and then it starts declining
through 10th income group. The last income group registers the highest
amount (Rs 34016.61 million) of expenditure benefits. The values of
taxes across income groups show mixed trend (column 4). As the column 4
shows that tax burden increases from the 1st income group through the
last one.
Column 5 of the Table 1 shows the average percentage expenditure
benefits of incomes of each income group. This column shows that the
lowest income group enjoys the highest expenditure benefits (65.86
percent of their income) and the richest income group gets the lowest
expenditure benefits (16.61 percent of their income).
Column 6 shows the tax burden as a percentage of income of each
income group. The table shows that the heaviest tax burden is on the
first income group (44 percent of their income). The second income group
bears the lower burden (18 percent), while income groups three to eight,
more or less, bear the same average tax burden. However, groups 9 and 10
bear comparatively higher burden of 21.73 percent and 27.48 percent
respectively. The 11th income group bears less burden (20.28 percent)
than the 10th income group.
Column 7 of the Table 1 shows net fiscal effects in the urban
areas. The table shows that the 2nd income group receives the highest
fiscal net-benefits (on average 23.67 percent of the income) followed by
the 1st income group (20.93 percent). The fiscal net benefits start
decreasing from income group three through income group eight and the
last three income groups get negative fiscal net-benefits.
Fiscal Incidence in Rural Areas of Pakistan
Columns 3 and 4 of Table 2 show absolute value of the expenditure
benefits and tax burden respectively across different income groups in
the rural areas. These columns show, more or less, cyclical behaviour of
the tax burden and expenditure benefits as these values have fluctuated
along income brackets.
Column 5 of the Table 2 shows the average percentage expenditure
benefits of the incomes of each income group. This column shows that the
lowest income group enjoys the highest expenditures benefits (45.64
percent of their income) and the richest income group gets the lowest
expenditure benefits (14.76 percent of their income). Column 6 shows the
tax burden as a percentage of the income of each income group. This
shows the highest tax burden on the first income group (33.40 percent of
their income). Other income groups from 2 through last, more or less,
bear decreasing average burden of the taxes. Column 7 of the Table 2
shows net fiscal effects in the rural areas. The 1st income group
receives the highest fiscal net-benefits (12.24 percent of the income)
followed by the 2nd income group (11.19 percent). The fiscal net
benefits are decreasing for all the subsequent income groups. This also
depicts that the fiscal system is pro-poor in the rural areas of
Pakistan.
While comparing fiscal net benefits (burden) across the income
groups in the urban-rural areas of Pakistan, it is evident from the
results that the households in the urban areas, from each income class
(from income group 1 through 8), receive higher benefits than the
households in the rural areas, from the same income groups. However, the
last three income groups in the urban areas are in net loss, while the
last three income groups of the rural areas are getting positive
expenditure benefits. All the above results are shown in graphical terms
in the figure below.
[FIGURE OMITTED]
IV. CONCLUSION
This study analyses the redistribution effects of the government
taxes and expenditures across the income groups by utilising HIES
(1992-93) data set. NNP is used as the income base. The absolute
expenditure benefits across income groups, in the urban areas, at first,
increases up to 4th income group, then falls in the 5th income group (Rs
7172 million), and then increases in the 6th group (Rs 7605 million).
The 7th Income group receives a lower expenditure benefits than the 6th
one. However, income group 8 receives benefits (Rs 11984 million) and
then it starts declining through 10th income group. The last income
group gets the highest amount of expenditure benefits (Rs 34016.61
million). Tax burden show the mixed trend. Absolute tax burden increases
from the 1st income group through the last income group.
As far as the average percentage expenditure benefits and tax
burden of the incomes of each income groups are concerned, the lowest
income group enjoys the highest expenditure benefits (65 percent of
their income) and the richest income group gets the lowest expenditure
benefits (16.61 percent of their income) and in case of taxes opposite
is true. The net fiscal benefits decrease as the income groups move to
higher and higher income group.
In the rural areas of Pakistan, the absolute value of the
expenditure benefits across different income groups show, more or less,
cyclical behaviour as these value fluctuate along income brackets. The
lowest income group enjoys the highest expenditure benefits (45.64
percent of their income) and the richest income group gets the lowest
expenditure benefits (14.76 percent of their income). The tax burden as
a percentage of the income of each income group heavily falls on the
first income group (33.40 percent of their income). Other income groups
from 2 through last, more or less, bear decreasing average tax burden.
The 1st income group receives the highest fiscal net-benefits (12.24
percent of the income) followed by the 2nd income group (11.19 percent).
The fiscal net benefits are decreasing for all the subsequent income
groups.
The households in the urban areas from each income class (from
income group 1 through 8) receive higher benefits than the households in
the rural areas from the same income groups. However, the last three
income groups in the urban areas are in net loss, while the last three
income groups of the rural areas get positive expenditure benefits.
In absolute terms, in Pakistan, the fiscal system redistributes
smaller amount to the poor classes compared with the rich people.
However, in percentage terms, lower income groups are receiving more
benefits compared to their contribution to national income. In order to
make the fiscal system more pro-poor, there is a need to increase the
incomes of the lower income groups.
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Comments
This paper examines the impact of government expenditures and taxes
on the distribution of income across various income groups along with
net fiscal impacts in the urban-rural areas of Pakistan. The paper has
used Net National Product (NNP) as the income base to estimate the
effects of government expenditures and taxes on the income distribution.
The NNP, taxes and expenditures have been decomposed into urban-rural
areas by using different weight system. The paper concludes that the
fiscal system redistributes smaller amount to the poor classes compared
to the rich people. However, in percentage terms, lower income groups
are receiving more benefits compared to their contribution to national
income. Based on these results it has been suggested that in order to
make the fiscal system more pro-poor there is a need to increase the
income of the lower income groups.
My comments on the paper are as follows:
Decomposition of the NNP, taxes and expenditures depends heavily on
the weights, but the paper did not provide sufficient information on
these weights, which makes it difficult to evaluate the weighting
system. Take the example of population weights that have been used in
almost all equations. If the population weight refers to the share of
rural and urban areas in total population of the country, it is
essential to take into account the differences in the level of
urbanisation. Although the 1998 census reveals the urban share in total
population as 33 percent, several scholars have shown serious doubts
about this percentage. Rather it has been suggested that about half of
the population presently live in urban areas of the country. Thus the
question is if this weight is adjusted what will be its effect on the
results presented in the paper? Similarly it is not clear how the income
weights were calculated?
Education differences have distributed between rural and urban
areas by taking into account their literacy and population differences.
But this seems to be a very crude measure for this distribution; the
actual public expenditure on education in rural and urban areas could be
substantially different. The same might be the case for health
expenditure distribution.
To distribute agriculture expenditures between urban and rural
areas, the paper has taken into account their population weights, income
weights and food weights. For the food weights, the availability of
agriculture food for households belonging to urban and rural areas has
been used. But it is not clear how this availability has been
calculated? Although it can be argued that the food system in Pakistan
has accommodated significant increases in urban population, the fact is
that 25 percent of urban population fell short of minimum per capita calorie requirements of 2295 kcal/day. Another factor resulting from
urbanisation which will stress both the marketing and distribution
system is dietary shifts. High income and more urbanised countries
consume less cereal grins, in favour of more meat, fruits and
vegetables. Even among lower income countries, urbanisation causes
changes in the demand pattern within the grain group. Some recent
studies have shown a significant shift in the demand patterns for
cereals as a result of urbanisation in nine Asian countries, including
Pakistan. An increase in demand for perishable commodities, such as
meat, fish dairy, and fruits, creates additional pressures in the
marketing system. In this scenario whether the food weights used in this
paper are appropriate?
With respect to the results, the paper shows that the expenditure
benefits across income groups fluctuate substantially. This fluctuation deserves some discussion since it makes very difficult to draw solid
policy implications. Can it be broadly attributed to data problems
particularly weighting systems introduced in the paper?
The paper shows the heaviest tax burden on the first income group
in rural as well as urban areas. More importantly the gap in tax burden
between the first and the next four income groups very large,
approximately three times. The question is why is so?
Finally, the paper uses only 1992-93 HIES data set, which is quite
old. Moreover, during the 1990s the incidence of poverty has increased
substantially. This increase, at least partly, has been attributed to
structural adjustment programme initiated in the late 1980s. These
changes deserve that the analyses presented in the paper should cover
the whole last decade. The HIES data is even available for the year
1998-99, and the 1998 census data are also available. Thus, to make the
analysis more meaningful, I would urge the authors to expand the paper
by covering all the HIES data sets carried out in the 1990s.
G. M. Arif
Pakistan Institute of Development Economics, Islamabad.
(1) Some case studies are of Snodgrass (1974): Reynolds and
Smolensky (1977); Thepthana (1979); Foxley. et al (1979); Kakvvani
(1986), Lambert (1989); Rugged et al. (1994) and Engel. et al. (1999).
(2) We have calculated income weights from the information given in
HIHS (1992-93) and population weight from the data reported in Economics
Survey of Pakistan (1994-95). See Appendix 2 for various weights used in
this paper.
(3) Please see Appendix II for different weights to distribute
expenditures and taxes between urban-rural areas.
(4) For detail see Reynolds and Smolensky (1977),
(5) We follow the assumptions of Reynolds and Smolensky! 1979) and
Thepthana (1977).
(6) Percentage distribution of government expenditures benefits,
percentage burden of taxes and percentage net fiscal effects are
depicted in Figure I for the urban areas and in Figure 2 for the rural
areas of Pakistan respectively.
(7) Distribution of households, imputed taxes, expenditures
benefits, pre-fiscal income and post-fiscal income across the income
groups are given in Appendix 1.
Nasim Shah Shirazi is Associate Professor at Kulliyyah of Economics
and Management Sciences, International Islamic University, Malaysia.
Muhammad llyas and Mehboob Ahmad are Lecturer and Assistant Professor,
respectively, at Allama Iqbal Open University. Islamabad.
APPENDIX 1
Table A
Distribution of Households (Million), Imputed Taxes, Expenditures
Net Expenditures and, Pre and Post-fiscal Incomes
(Rupees in Million), (Urban) 1992-93
Incomes No. of
Groups Households Taxes Expenditures
Up to-1000 0.150 1411.5 778.71
1001-1500 0.270 2447.47 1057.53
1501-2000 0.540 5585.09 2607.29
2001-2500 0.650 7431.96 3614.68
2501-3000 0.570 7172.22 31179.86
3001-3500 0.550 7605.33 4443.25
3501-1000 0.490 7212.64 5372.33
4001-5000 0.720 11434.82 9320.48
5001-6000 0.480 9088.76 9687.31
6001-7000 0.360 7750.58 11006.02
7001 and 0.940 34016.61 41538.79
above
Incomes Net Pre-fiscal Post-fiscal
Groups Expenditures Incomes Incomes
Up to- 1000 362.79 1733.18 2095.97
1001-1500 1389.94 5893.54 7263.48
1501-2000 2977.8 16417.03 19394.83
2001-2500 3817.28 25082.92 28900.2
2501-3000 3456.92 26761.66 30128.58
3001-3500 3162.08 30619.45 33781.53
3501-1000 1840.31 30753.88 32604.19
4001-5000 26663.57 54787.63 57451.2
5001-6000 -598.55 44581.15 43982.6
6001-7000 -3255.44 40055.63 36800.19
7001 and -7522.18 204851.83 197329.65
above
Source: Our estimates based on HIES (1992-93) and Economic
Surveys (Various Issues).
Table B
Distribution of Households (Million), Imputed Taxes, Expenditures,
Net Expenditures and, Pre and Post fiscal Incomes
(Rupees in, Million), (Rural) 1992-93
Incomes No. of
Groups Households Taxes Expenditures
Up to-1000 0.90 4306.69 3151.45
1001-1500 1.70 10307.01 6431.75
1501-2000 2.45 17841.01 11841.20
2001-2500 2.11 6956.865 11132.57
2501-3000 1.44 13100.41 8823.85
3001-3500 1.16 11699.4 8499.13
3501-3000 0.75 8362.93 5764.33
4001-5000 1.07 13351.33 9722.5
5001-6000 0.53 7722.17 5299.11
6001-7000 0.29 4768.92 3030.22
7001 and 0.74 19956.68 12088.64
above
Incomes Net Pre-fiscal Post-fiscal
Groups Expenditures Incomes Incomes
Up to-1000 1155.24 9436.18 10591.42
1001-1500 3875.85 34663.52 38539.37
1501-2000 5986.02 68877.71 74863.73
2001-2500 5824.33 75361.07 81185.4
2501-3000 4276.56 631664.64 67441.2
3001-3500 3200.27 60019.25 63219.52
3501-3000 2598.6 44870.01 47468.61
4001-5000 3628.83 75168.49 78797.32
5001-6000 2423.06 45768.69 48191.75
6001-7000 1738.7 29399.80 31138.5
7001 and 7868.04 135187.74 143055.78
above
Source: Our estimates based on HIES (1992-93) and Economic
Surveys (Various Issues).
APPENDIX 2
Different Weights to Distribute Income Base, Government Expenditures
and Taxes between Urban und Rural Areas of Pakistan (1992-93)
Urban 1992-93
[(WU).sup.NNP] 0.430
[(WU).sup.ED] 0.554
[(WU).sup.H] 0.330
[(WU).sup.D] 0.430
[(WU).sup.GA] 0.429
[(WU).sup.Ag] 0.380
[(WU).sup.I] 0.430
[(WU).sup.IN] 0.955
[(WU).sup.P] 0.927
[(WU).sup.IT] 0.403
[(WU).sup.M] 0.400
[(WU).sup.X] 0.429
Rural 1992-93
[(WU).sup.NNP] 0.570
[(WU).sup.ED] 0.446
[(WU).sup.H] 0.670
[(WU).sup.D] 0.570
[(WU).sup.GA] 0.571
[(WU).sup.Ag] 0.620
[(WU).sup.I] 0.570
[(WU).sup.IN] 0.045
[(WU).sup.P] 0.073
[(WU).sup.IT] 0.597
[(WU).sup.M] 0.600
[(WU).sup.X] 0.571
Source: HIES 1992-93 and Economic Surveys (Various Issues).
Table 1
Income, Taxes, Expenditure Benefits, Expenditures and Taxes as a
Percentage of Income of Each Income Group and Net-fiscal Effect
across the Income Groups (Urban-1992-93)
2 3
1 Incomes Expenditures
Income ([Y.sub.i]) ([e.sub.i])
No. Groups Rs Million Rs Million
1 Up to 1000 1733.18 1141.5
2 1001-1500 5893.54 2447.47
3 1501-2000 16417.03 5585.09
4 2001-2500 25082.92 7431.96
5 2501-3000 26761.66 7172.22
6 3001-3500 30619.45 7605.33
7 3501-4000 30763.88 7212.64
8 4001-5000 54787.63 11984.05
9 5001-6000 44581.15 9088.76
10 6001-7000 40055.63 7750.58
11 7001 and 204851.8 34016.61
above
4 5
Taxes [E.sub.i] =
([t.sub.i]) ([e.sub.i]/
No. Rs Million [Y.sub.i]) 100
1 778.71 65.86
2 1057.53 41.67
3 2607.29 34.02
4 3614.68 29.63
5 3715.3 26.98
6 4443.25 24.84
7 5372.33 23.45
8 9320.48 21.87
9 9687.31 20.39
10 11006.02 19.35
11 41538.79 16.61
6 7
[T.sub.i] = NE =
(ti/[Y.sub.i]) ([e.sub.i]-
No. 100 [T.sub.i]
1 44.93 20.93
2 18.00 23.67
3 15.88 18.14
4 13.41 15.22
5 13.93 12.96
6 14.51 10.33
7 17.46 5.99
8 17.01 4.86
9 21.73 -1.34
10 27.48 -8.13
11 20.28 3.676
Source: Our estimates.
Note: [E.sub.i]: Average percentage expenditures of the incomes of
each income group.
[T.sub.i]: Tax burden as a percentage of the income of each income
group.
NE: Fiscal Net-Effect.
Table 2
Income, Taxes, Expenditure Benefits, Expenditures and Taxes as a
Percentage of Income of Each Income Group and Net-fiscal Effect
across the Income Groups (Rural-1992-93)
2 3
1 Incomes Expenditure
Income ([Y.sub.i]) ([e.sub.i])
No. Groups Rs Million Rs Million
1 Up to 1000 9436.18 4306.69
2 1001-1500 34663.52 10307.58
3 1501-2000 68877.71 17291.78
4 2001-2500 75361.07 16956.865
5 2501-3000 63166.64 13100.4l
6 3001-3500 60019.25 11699.4
7 3501-4000 44870.01 8362.93
8 4001-5000 75168.49 13351.33
9 5001-6000 45768.69 7722.17
10 6001-7000 29399.80 4768.92
11 7001 and 135187.74 19956.68
above
4 5
Taxes [E.sub.i] =
([t.sub.i]) ([e.sub.i]/
No. Rs Million [Y.sub.i]) 100
1 3151.45 45.64
2 6431.75 29.74
3 11305.76 25.11
4 11132.57 22.50
5 8823.85 20.74
6 8499.13 19.49
7 5764.33 18.64
8 9722.50 17.76
9 5299.11 16.87
10 3030.22 16.22
11 12088.64 14.76
6 7
[T.sub.t] = NE =
([t.sub.t]/ [E.sub.i]-
No. [Y.sub.t]) 100 [T.sub.i]
1 33.40 12.24
2 18.55 11.19
3 16.41 8.7
4 14.77 7.73
5 13.97 6.77
6 14.16 5.33
7 12.85 5.79
8 12.93 4.83
9 11.85 5.29
10 10.31 5.91
11 8.94 5 82
Source: Our estimates.
Notes: [E.sub.i]: Average percentage expenditures of the incomes of
each income group.
[T.sub.i]: Tax burden as a percentage of the income of each income
group.
NE: Fiscal Net-Effect.