ISLAMABAD
Three of the provinces except Punjab have asked the federal government to devolve sales tax on goods to the provinces in next National Finance Commission award (NFC).
“We have asked the federal government to abolish the Federal Excise Duty (FED), as it is double taxation with sales tax on goods. We have also demanded of the Center to collect sales tax on goods by the province, which is also supported by Balochistan and Khyber Pakhtunkhawa,” said Senator Saleem Mandviwalla, Member NFC Sindh while talking to The Nation.
Saleem Mandviwalla, who is also former finance minister and current chairman of Senate Standing Committee on finance, criticised the PML-N government for delaying constituting the 8th NFC award. “Not only Sindh, but Balochistan and KPK provinces also reacted on the behaviour of the federal government, which is acting against the provinces autonomy”, he added.
He rejected the decision of the federal government for granting one-year extension to Balochistan in 7th NFC award. “The government was required to call the meeting of NFC for granting extension to the NFC award, which was not summoned”.
The PML-N government had failed to constitute 8th NFC award before the start of current financial year (July 2015), which led to extend the previous award for one year. The government held maiden meeting for new award in April this year and no further development has been made so far. The Commission in its first meeting agreed to undertake detailed background work in the following areas through constituting Sub-groups:1) Resource mobilisation at Federal & Provincial Level2) Devolved versus Integrated Tax Structure - Evolution of Tax Collection Framework in Pakistan3) Allocation efficiency and expenditures Analysis at the Federal and Provincial level 4) Rationalistion of subsidies and grants.
The meeting of working group of 9th NFC Award held on Monday under the chair of Senator Saleem Mandviwalla, Member NFC Sindh to discuss evolution of tax collection framework in Pakistan and the devolved verses integrated tax structure in Pakistan. Finance Minister of Sindh Murrad Ali Shah, Finance Minister KPK Syed Muzaffar Hussain Shajra, Qaisor Bengali, Member NFC Balochistan and Chairman Punjab and Sindh Revenue Authorities also attend the meeting.
Senator Saleem Mandviwalla presented the report of 2nd working group and said that the group has prepared its report on Evaluation of Federal and Provincial tax collection system; Look into the best international practices and benchmarking. Study the pros and cons of integrated vs. devolved tax collection mechanism. It has evolve conclusions and suggests recommendations.
While briefing the meeting on the report, Senator Saleem Mandviwalla elaborates that the working group has proposed that collection of sales tax on goods should be devolved to provinces. Each province transfers the collected amount to federal government, which in turn be distributed as per the spirit of the NFC Award. In order to incentivise collection, NFC works out an agreed province-wise projected amount of sales tax on goods.
Mandviwalla said that a suggestion to incentivise provincial collection is made on the basis of the amount of collection on sales tax on goods in excess of its projected estimates for respective provincial governments for its retention as reward for improved tax collection. Balochistan and KPK supported the demand of Sindh to collect sales on goods by the provinces and were of the view that it would help to generate more revenue.
Senator Mandviwalla criticises the federal government by delaying the 9th NFC Award and said that the meeting of working group has been cancelled due to non-serious attitude of Federal Government.