Abstract

Economic development of the country is coined with industrial development. The historical records of Pakistan portray that the industrial state of the country was static at the time of independence. However, proliferation was developed in the infant industry under government support, but the performance of the automotive sector has not been commanding for most of the years. The market trends do not only influence the structural development of the industry in developing economies like Pakistan, but other factors such as government intervention, taxation, and incentives are other crucial elements in determining the structure of the industry. This research intends to investigate the relationship between taxation and the performance of the automotive industry. The focus of this research is to identify the key factors that determine the success and failure of the automotive industry. The study utilizes secondary data sources as well as qualitative assessments. Secondary data explores firm-level annual and balance sheets of three automobile companies listed on the Pakistan Stock Exchange for the period 2000 to 2to 019 with a particular focus on the performance indicators of the companies. ARDL approach is carried out to analyze the performance of the automobile industry in Pakistan. The qualitative analysis involves open-ended semi-structured questionnaires from experts in different institutions. The findings of the study suggest that tax revenue promotes the automobile industry‟s performance. Therefore, it is recommended that for the development of industry public infrastructure financing and a well-structured policy framework is essential. Further, a complex tax structure should be replaced with clear and a uniform tax mechanism. Centralized investment planning and industrial management are direly needed.