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In the Same Boat, but not Equals: The Heterogeneous Effects of Indirect Taxation on Child Health in Punjab-Pakistan

  • Faiz Ur Rehman EMAIL logo and Muhammad Nasir
Published/Copyright: November 3, 2020
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Asian Journal of Law and Economics
From the journal Asian Journal of Law and Economics Volume 11 Issue 3

Abstract

The 2011 National Nutrition Survey of Pakistan revealed that 51% of the country’s population was consuming less than 2,100 calories a day. In the backdrop of rising food insecurity, hunger, and malnutrition in Pakistan, this study aims to measure the effects of indirect taxation on health outcomes of children (<5 years). More specifically, the impact of the incidence of General Sales Tax (GST) in the province of Punjab has been estimated on a child’s height and weight. The proponents of the uniform GST argue that the tax would not affect children because most food items consumed by children are exempted from the GST. However, the opponents believe that households, especially those belonging to the lower-income group, would reallocate resources away from children in the face of higher GST. To study these effects, we utilized three different waves (2007–08, 2011 & 2014) of Multiple Indicators Cluster Surveys (MICS). The results show that the tax incidence, and not the GST rate, has a significantly negative impact on children’s height-for-age Z-score (HAZ). No effect was found on the weight-for-age-z-score (WAZ). These results are robust to different specifications and exhibit considerable heterogeneity across different income groups. These findings suggest that the exemption of certain food items for children from the GST may not eliminate the negative effects of this tax on a child’s health. Thus, our study raises concerns about the long term welfare consequences of GST.

Keywords: health; public policy; taxes; tax incidence
JEL Classification: H2; I12; I22; J18
Corresponding author: Faiz Ur Rehman, School of Economics, Quaid-i-Azam University, Islamabad, Pakistan, E-mail:

We gratefully acknowledge funding from the South Asia Network of Economic Research Institutes (SANEI) for the study. We are also thankful to the conference participants and their comments at the University of Sargodha, Quaid-i-Azam University Islamabad, Asian Law & Economics Association, Lahore School of Economics, Pakistan Institute of Development Economics, and the 15th Annual conference of South Asia Network of Economic Research Institutes (SANEI). The usual disclaimer applies.

  1. Research funding: This article is funded by South Asia Network of Economic Research Institutes (SANEI).

  2. Author contribution: All the authors have accepted responsibility for the entire content of this submitted manuscript and approved submission.

  3. Competing interest: The authors declare no conflicts of interest regarding this article.

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Published Online: 2020-11-03

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https://doi.org/10.1515/ajle-2020-0041
Keywords for this article
health; public policy; taxes; tax incidence

Articles in the same Issue

  1. Coping with COVID-19: Legal, Economic, and Policy Perspectives
  2. Patent Races for COVID-19 Vaccines and Liability Rules
  3. Are In-Person Shareholder Meetings Outdated? The Value of Implicit Communication
  4. Regular Issue
  5. India’s Inequality Trap: The Role Played by Taxation Policies and Automation
  6. The Trade-off Between Household Expenditures and Smoking Expenditure: Pre and Post Smoking Awareness Ordinance in Pakistan
  7. In the Same Boat, but not Equals: The Heterogeneous Effects of Indirect Taxation on Child Health in Punjab-Pakistan
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