The latter are used to capture the impact of the size of the tax base on rates along with per capita industrial value-added since a major component of octroi tax base consists of industrial import.
This implies that in municipal jurisdictions where the level of import of intermediate goods is relatively high (because of greater industrial presence), octroi tax rates are lower.
This is an interesting paper on the question of the determinants of rates of Octroi taxes, an area which has been greatly neglected in the empirical work in Pakistan.
The authors have tried to determine the efficiency of octroi taxes through their adherence to certain principles of optimal commodity taxation.
First, since the conclusion is based on the assumption that for each locality/district/town the prices are exogenous, one can use a little relaxed assumption of exogenous prices and prove that the octroi taxes are really inefficient in Pakistan.