Tax Policy And Enterprise Development in South Asia

Inclusive growth continues to remain a challenge for South Asian economies. Experts now agree that the missing link between growth and inclusivity is labour market outcomes that generate well-paying and productive jobs. Most non-agricultural employment in South Asia is concentrated in small enterprises characterized by very low productivity and wages. Research indicates that small enterprise development and employment generation is strongly linked to tax policy. First, tax exemptions and concessions are largely skewed to favour large enterprises. Second, small enterprise development is affected by taxes such as the Value Added Tax (VAT). Third, small enterprise development is affected by weak local property taxation. The gender dimension of small enterprise development in South Asia has been ignored in policy and research. These problems need to be researched through an integrated framework from the national and international perspectives. This research aims to fill research gaps, inform policy, and provide opportunities for shared learning outcomes at the regional level. The study covers five South Asian economies namely, Sri Lanka, Pakistan, India, Bangladesh and Nepal.