Tax Compliance and Its Effects on Investment in Pakistan

Abstract

This research analyses the effect of tax compliance on the investment of companies listed at the Pakistan Stock Exchange. While policymakers have made an effort to impose more uniformity on corporate tax policies, limited empirical study exists to quantify the extent to which tax compliance have altered the structure of investment decisions. This study shows that the compliance with the corporate tax, depreciation tax shield, interest tax shields and the after-tax cash flow has significant impact on the investment made by the investors. There is a negative relation of the depreciation tax of firms on the decisions of the investments while there is evident a positive impact of corporate tax, interest tax shields and the after-tax cash flow on investment decisions.