Efficiency Analysis of Decentralized Services Tax in Khyber Pakhtunkhwa: an Application of Data Envelopment Analysis

The study offers an innovative empirical study to evaluate the efficiency of Khyber Pakhtunkhwa revenue agency and the Federal Board of Revenue with reference to the decentralized services sales tax. The paper makes a unique contribution by incorporating the effect of fiscal decentralisation on the efficiency of services tax in current empirical research. The study evaluated both tax departments using a non-parametric technique termed advanced envelopment analysis. Six inputs and four outputs make up the main service operations carried out by the tax offices. Regarding the efficiency score, which is satisfactorily, the empirical outcomes of both technical efficiency output and input DEA approaches are remarkably close. The study, which also concentrated on the post-decentralization situation, revealed a number of potential difficulties that the Khyber Pakhtunkhwa revenue administration may have encountered in the early years of its existence, clearly demonstrating a lack of preparedness prior to devolution. Finally, the study recommended addressing the concerns mentioned, including the conflict of jurisdiction, the refund issue, and the lack of sales tax experts to empower province of Khyber Pakhtunkhwa to handle the devolved services tax to the full extent of its potential.