The study examines the determinants of low tax revenue in Pakistan over the past 37 years, focusing on economic policy variables, external factors, and social indicators. The analysis uses time series data and an autoregressive model to capture the dynamic effects of fiscal efforts and eliminate autocorrelation. Key findings include: 1. **Agricultural Sector**: The share of agriculture in GDP is negatively correlated with the tax-to-GDP ratio, but this relationship is statistically insignificant in Pakistan. 2. **Manufacturing Sector**: The share of manufacturing is positively correlated with tax revenue, but it is also statistically insignificant. 3. **Service Sector**: The share of the service sector is negatively correlated with tax revenue, though it is not statistically significant. 4. **Macroeconomic Policies**: Openness, ample money (M2), external debt, and political stability are significant determinants of fiscal efforts. Exchange rate and monetization (M2) have positive relationships with tax revenue, while inflation is not significant. 5. **Social Indicators**: Literacy rate and urbanization are negatively correlated with tax revenue, while political stability is positively correlated. 6. **External Environment**: External debt and worker remittances positively affect tax revenue, but foreign aid negatively affects it, though these variables are not significant in Pakistan. 7. **Literacy and Documentation**: Literacy is crucial for successful tax collection, and documentation is essential for an effective tax system. 8. **Economic Inequality**: Low per capita income and high unemployment contribute to low tax revenue, suggesting a need to increase the direct tax base. 9. **Agricultural Taxation**: Tax exemptions for agricultural income impose a burden on other sectors and reduce revenue, highlighting the need for uniform taxation. The study concludes that increasing openness, M2, and political stability can help raise tax revenue levels. Consistency in tax implementation and a stable legal environment are also crucial for effective tax collection.The study examines the determinants of low tax revenue in Pakistan over the past 37 years, focusing on economic policy variables, external factors, and social indicators. The analysis uses time series data and an autoregressive model to capture the dynamic effects of fiscal efforts and eliminate autocorrelation. Key findings include: 1. **Agricultural Sector**: The share of agriculture in GDP is negatively correlated with the tax-to-GDP ratio, but this relationship is statistically insignificant in Pakistan. 2. **Manufacturing Sector**: The share of manufacturing is positively correlated with tax revenue, but it is also statistically insignificant. 3. **Service Sector**: The share of the service sector is negatively correlated with tax revenue, though it is not statistically significant. 4. **Macroeconomic Policies**: Openness, ample money (M2), external debt, and political stability are significant determinants of fiscal efforts. Exchange rate and monetization (M2) have positive relationships with tax revenue, while inflation is not significant. 5. **Social Indicators**: Literacy rate and urbanization are negatively correlated with tax revenue, while political stability is positively correlated. 6. **External Environment**: External debt and worker remittances positively affect tax revenue, but foreign aid negatively affects it, though these variables are not significant in Pakistan. 7. **Literacy and Documentation**: Literacy is crucial for successful tax collection, and documentation is essential for an effective tax system. 8. **Economic Inequality**: Low per capita income and high unemployment contribute to low tax revenue, suggesting a need to increase the direct tax base. 9. **Agricultural Taxation**: Tax exemptions for agricultural income impose a burden on other sectors and reduce revenue, highlighting the need for uniform taxation. The study concludes that increasing openness, M2, and political stability can help raise tax revenue levels. Consistency in tax implementation and a stable legal environment are also crucial for effective tax collection.