This study attempts to investigate the effect of free trade on trade tax revenue in case of Pakistan, during 1972 to 2014. For time series analysis, Autoregressive Distributed Lag (ARDL) model has been used for examining the long-run co-integration among the variables; Vector Error- Correction (VECM) model is used for short-run dynamics of the variables. The empirical results show that quantitative trade restriction is positively linked with trade tax revenue. On the basis of empirical findings, this study suggests that trade liberalization has negative impact on trade tax revenue. It improves the volume of average tariff rate which may cause to increase the trade tax revenue for Pakistan, in both the short-run and long-run.
