Provinces’ share in divisible pool goes up by 20.1pc

ISLAMABAD    –   Following increase in tax collection target of Federal Board of Revenue (FBR), the federal government has enhanced the provincial governments’ share from divisible pool by 20.1 percent for the next fiscal year.

The four provinces would receive Rs4.099 trillion from the centre under National Finance Commission (NFC) Award in next financial year as against Rs3.411 trillion of the outgoing fiscal year, showing an increase of 20.1 percent.  The share of provinces has increased by Rs688 billion due to the federal government’s decision of enhancing tax collection target for Federal Board of Revenue (FBR). The government has set Rs7 trillion tax collection target. The amount to be transferred to the provinces would depend on the Federal Board of Revenue’s performance to achieve its collection target of Rs7 trillion in the fiscal year 2022-23.

The government has enhanced the share of the provinces under NFC award, but it has also asked them to give surplus budget of Rs800 billion to restrict its budget deficit at Rs3.798 trillion or 4.9 percent of the GDP.

Under the 7th NFC Award, the Federal Divisible Pool was distributed as 57.5 percent share for the provinces and the remaining for Centre. The provincial governments get shares from the federal government under NFC Award as per the said formula. Punjab gets 51.74 percent, Sindh 24.55 percent, Khyber Pakhtunkhwa 14.62 percent and Balochistan 9.09 percent.

According to the budget documents, the federal government would transfer Rs2.029 trillion to Punjab in the next fiscal year against Rs1.691 trillion of the current fiscal year. Sindh will receive Rs1.029 trillion in the FY2022-23 as compared to Rs848.21 billion of the outgoing year.  Khyber-Pakhtunkhwa will receive Rs670.45 billion as against Rs559.26 billion in the ongoing year. KP would get one per cent under the war on terror. The federal government would transfer Rs370.234 billion to Balochistan in next fiscal year as compared to Rs313.296 billion of the last year.

The break-up of Rs4.099 trillion, which would be transferred to the provinces, showed that Rs3.974 trillion would be transferred from the divisible pool, which was Rs3.31 trillion in the outgoing year. Meanwhile, the federal government would transfer Rs125.445 billion as straight transfers during the next financial year that was Rs101.37 billion in the outgoing year.

The break-up of divisible pool taxes showed that Rs1.462 trillion would be collected as income tax, Rs303 million capital value tax, Rs1.683 trillion sales tax on goods, Rs233.65 billion federal excise duty and Rs594.267 billion customs duty in the fiscal year 2022-23.

Similarly, the break-up of straight transfers showed that Rs19.6 billion would be accumulated as gas development surcharge, Rs61.118 billion as royalty on natural gas, Rs32.416 billion as royalty on crude oil, Rs12.311 billion as excise duty on natural gas.

The five-year constitutional term of the 7th NFC Award expired on June 30, 2015. Since then, the federal government is continuously extending the seventh award after failing to constitute the new NFC Award. Previous government of PML-N and the incumbent PTI government both failed to formulate the fresh resource sharing formula between federal government and the provinces.

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