ISLAMABAD - The massive shortfall in tax collection of Federal Board of Revenue (FBR) has resulted in lesser revenue transfer to the four provinces under the National Finance Commission (NFC) award during nine months of the current fiscal year.
The federal government has transferred Rs1779 billion to the provinces under NFC award during nine months (July to March) of the ongoing financial year. As per revenue sharing formula, the provinces were supposed to receive Rs1942.5 billion (75 percent of annual transfer) in nine months from the federal government. However, the FBR’s inability to meet its target has deprived provinces from Rs163 billion from the centre.
The share of provinces in the federal divisible pool was estimated at Rs2.59 trillion for the current fiscal year. However, it was subject to collection of Rs4.398 trillion in taxes by the FBR. Since, the FBR has faced massive shortfall in tax collection, which was around Rs295 billion in nine months, therefore, the provincial share has also affected under NFC award. “Revenue transfer to provinces from divisible pool entirely depends on the tax collection of the FBR,” said an official of the ministry of finance. The federal government has no other resources to transfer the revenues than the divisible pool. The FBR has collected Rs2, 703 billion in nine months as against the desired target of Rs2,998 billion making the shortfall of Rs295 billion. The government is struggling to restrict the budget deficit despite introducing two mini budgets in last six months. According to the FBR, the major reasons behind massive shortfall in tax collection are the government’s incentives policies. Reasons behind massive decline in tax collection are tax incentives on salaries given by last government, telecom tax suspended by the Supreme Court of Pakistan, reduced tax rates on POL products and slowdown of development programme in the country.Under the 7th NFC award, the federal government is bound to transfer 57.5 percent of the resources to the four provinces. The five-year constitutional term of the financial arrangement expired on June 30, 2015. Since then, the federal government is continuously extending the award for every fiscal year. 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 NFC award, the federal government has to transfer Rs2590 billion to four provinces during ongoing fiscal year.
Punjab
The Punjab government has received Rs866.6 billion from the federal government during first nine months of the current fiscal year, which is 67.6 percent of the annual share of Rs1282 billion.
Sindh - The Sindh government has received Rs441.9 billion from the federal government during July to March period of the year 2018-19, which is 68 percent of its annual share. The Sindh would receive Rs648.8 billion during entire current fiscal year.
Khyber-Pakhtunkhwa - The province has received Rs290.4 billion from the federal government under NFC during first nine months of the current fiscal year, which is 68 percent of the annual share. The KP received one percent additional funds under the NFC Award due to the war on terror.
Balochistan - Balochistan gets its share on the basis of projections as compared to other three provinces which receive their share as per actual tax collection. The province has received Rs180.3 billion in first nine months from the federal government, which is 58.7 percent of Rs233.2 billion to be released in the ongoing financial year under NFC.