The provinces would pay the price of Federal Board of Revenue (FBR)’s inability that failed to collect thrice-revised tax collection target during previous year 2014-15, as they would receive lesser revenue from the federal government under National Finance Commission (NFC) award.

The FBR has failed to meet thrice revised tax collection target of Rs 2605 billion set for the previous financial year, as it collected Rs 2588 billion by the end of June 2015. The federal government would now transfer lesser revenue to the provinces under NFC award after tax department failed to achieve its target.

The FBR had fixed the target of Rs 2,810 billion, but it was revised thrice by the government, bringing it down to Rs 2,756 billion, then Rs 2,691 billion and finally to Rs 2,605 billion for 2014-15. However, the government did not achieve the revised target even after announcing mini budgets during the last fiscal year. The FBR has collected Rs 2588.176 billion in July-June 2014-15 against Rs 2254.531 billion in the corresponding period of 2013-14, showing an increase of 14.8 percent.

Earlier, the Ministry of Finance had estimated to transfer Rs1,574.7 billion to the four provincial governments during FY2015-16 under the National Finance Commission (NFC) award on the basis of FBR’s target of Rs 2605 billion. The federal government would have to revise the amount of Rs 1574.7 billion after FBR’s failure in achieving the target.

The federal government had projected to transfer Rs 1,720.1 billion to the provinces under the NFC award on the basis of tax collection target of Rs 2810 billion.

The federal government transfers revenue to the provinces under the 7th National Finance Commission (NFC) award on the following formula, Punjab gets 51.74 percent, Sindh 24.55 percent, Khyber Pakhtunkhwa 14.62 percent and Balochistan 9.09 percent.

The break-up of Rs 1,574.71 billion to be transferred to the four provinces shows the Punjab government would now receive Rs 751.45 billion from the federal government against the budgetary estimates of Rs 812.79 billion during the outgoing fiscal year, reflecting decline of Rs 61.34 billion.

It is worth mentioning here that federal government has extended the 7th National Finance Commission (NFC) award to provide due fiscal shares to provinces allocated in the federal budget for 2015-16. The last year’s NFC award expired on June 30 and on the same day it was extended by the president. The government would transfer the resources to the provinces during ongoing financial year under the 7th NFC award.

The federal government has failed to constitute 8th NFC award and it started negotiations for it. The reconstituted NFC, in its first meeting on April 28, formed five committees, which would take time to complete their deliberations. It was, therefore, a constitutional requirement to extend the previous award for distribution of divisible pool taxes till a consensus is developed on the new award.