@Tutankhamen

Let me give my explanation:

1. Your first explanation is the main argument of Supply Siders against hike in tax rate. They think that lower tax rate will increase the incentive to work, thereby increasing aggregate supply. However empirical results are mixed on relative success or failure of this argument. However your logic is very right, although Neo Classicals may differ. Regarding your answer about just tax system, then it is usually thought in economics that direct taxes are more equitable than indirect ones, however regarding efficieny indirect taxes are more efficient. There is much debate on equity vs efficiency. Since you are answering a subjective idea "just tax system", then in my thinking equity is the main principle you would prefer. So imposition of direct taxes is more likely to be just, although debatable.

2. Your second argument is flawed. Even if we assume that increased tax revenue is reinjected in the economy through government spending, then how it is going to change aggregate supply the way you are saying?

I agree to Xenia, that question is not about Pakistan, so avoid it.

Regards