A computational general equilibrium approach to sectoral analysis for tax potential: An application to Pakistan

We have applied our model to Pakistan, and have calibrated our model to an 8 year period from 2004 to 2011. We note that it gives a reasonable approximation of Pakistani macro data. We then use a sectoral breakdown of tax data generated by the model to estimate tax gaps on a sector by sector basis. We note that certain sectors are currently paying taxes below their potential, while others may be above their tax potential. These sectoral gap estimates may be used as indicators of where greater tax enforcement efforts should be directed.