ISLAMABAD         -        The Federal government would slash the share of provincial governments from the divisible pool after reducing the tax collection target of Federal Board of Revenue (FBR). The government had downward revised the tax collection target of FBR to Rs5238 billion from budgetary target of Rs5550 billion.

The government had revised the tax collection target after continuous failure of FBR in achieving its monthly tax collection targets.

The reduction in FBR’s tax collection would also slash the provincial governments share from the divisible pool, which would affect their annual budgets.

In the annual budget 2019-20, the federal government had projected to transfer Rs3254.6 billion to the four provincial governments under the NFC Award during the present fiscal year as against Rs2462.7 billion handed to them last year.

However, the federal government may now reduce the provinces share to around Rs3000 billion for the current financial year.

According to data of ministry of finance, provincial governments had received Rs1325.8 billion from the federal government under the NFC in first half (July-December) period of the year 2019-20.

The provinces were supposed to receive Rs1627.3 billion from the Centre. However, federal government had withheld Rs301 billion of the provinces despite the fact that tax collection of FBR was not that much broaden.

The data shows that the federal government has slashed the provinces’ share more than the shortfall suffered by the FBR in the first quarter of the current FY.

The FBR had faced a massive tax collection shortfall of Rs274 billion in first six months (July to December) of the current financial year.

The FBR had targeted a total collection of Rs2367 billion for the first six of this year. However, the FBR collected Rs2093 billion during the period under review.

The provincial governments get shares from the federal government under the 7th National Finance Commission (NFC) Award as per this formula: Punjab gets 51.74 percent, Sindh 24.55 percent, Khyber Pakhtunkhwa (KP) 14.62 percent and Balochistan 9.09 percent.

The data collected by the Ministry of Finance shows that the federal government has transferred Rs634.4 billion to Punjab in the first half of this FY20.

The amount is 39.4 percent of the province’s annual share in the Award. The federal government has projected to transfer Rs1611.4 billion to Punjab in the ongoing fiscal year.

Meanwhile, Sindh has received only 40.2 percent of its share from the federal government as against the projected 50 percent share.

The federal government has transferred Rs327.7 billion to Sindh during July-December period of the ongoing financial year. In all, Sindh will receive Rs814.9 billion from the Centre in the entire FY.

According to the documents, KP has received Rs214.7 billion from the federal government, which is 40.3 percent of its annual share.

The province will receive Rs533.3 billion as against Rs404 billion in the last year.

However, Balochistan has received more than its projected share. The province has received Rs148.9 billion from the federal government under the NFC Award in the first quarter of the current fiscal year, which is 50.5 percent of its annual share of Rs295 billion.

It is worth mentioning here that the five-year constitutional term of the financial arrangement, NFC, had expired on June 30, 2015.

However, the Pakistan Muslim League-Nawaz government had paid no heed to the demand of the provinces for formulating a fresh revenue sharing formula.

The incumbent government had reconstituted the NFC, but it held only two meetings under the former finance minister Asad Umar.

However, the government did not reconstitute the NFC after the removal of Umar from the post.