ISLAMABAD - The federal government would slash the revenue share of the provincial government under National Finance Commission (NFC) award following Federal Board of Revenue (FBR)’s failure to achieve its tax collection target.

The FBR is struggling to achieve its tax collection target of Rs3631 billion during ongoing financial year 2016-17. The FBR had collected Rs2520 billion during ten months (July-April) of the current fiscal year. Therefore, the FBR unofficially revised its target to Rs3500 billion for the year 2016-17.

“The reduction in tax collection target will hit the revenue sharing with provinces under NFC award,” said an official of the FBR while talking to The Nation. He further said that federal government has asked the provinces to adjust their budgets according to the new tax collection target.

In the budget 2016-17, the government decided to transfer Rs2.135 trillion to the provinces. The federal government had budgeted to transfer Rs1045.01 billion to Punjab, Rs547.84 billion to Sindh, Rs346.18 billion to Khyber Pakhtunkhwa and Balochistan province to get Rs196.84 billion.

However, the center would now reduce this amount by around Rs70 billion depending on future collection of FBR during last quarter (April to June) of the year 2016-17.

On the other hand, it would be difficult for the provinces to give budget surplus of Rs339 billion to federal government to restrict the country’s budget deficit at 4.1 percent of the GDP if it does not receive entire budgeted amount under NFC. The country’s budget deficit had already surged to Rs1.24 trillion during nine months (July-March) of the current fiscal year due to the massive expenditures and shortfall in taxes as well as in non-taxes. The government had fixed the budget deficit target at 3.8 percent of the GDP (Rs1.276 trillion) for the current financial year. However, the government had revised the target to 4.1 percent of the GDP (Rs1.375 trillion) due to the massive shortfall in taxes.

The federal government transfers the revenue from divisible pool to provinces under 7th NFC award in the budget. Under the 7th NFC Award, the federal govt is bound to transfer 57.5 percent resources to all the four provinces from federal divisible pool. Under the current award, Punjab gets 51.74pc share, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62 percent and Balochistan 9.09pc under the divisible pool.