Life in Balochistan is in severely-clenched claws of deprivation and chains of rampant poverty. More than half of the population of the province is languishing in stark poverty, live below proverbial line of poverty. Nature has been gracious enough to fill its wallet with material resources. But it still lives in solitary on peak of barren inhospitable mountain midst of a palpable ocean of material prosperity. This has yet to receive even sign of dusk. The national economy is showing positive signals after a lapse of seven years. Economic indicators are improving due to fruitful efforts but there is no trade, industrial set up to translate better economic performance for people in Balochistan and affect their lives. The province is fully dependent of federal transfers. Balochistan have a dream to one day when staring eyes, about to lose hope, will witness first ray from the end of long dark tunnel end. In pursuance of its well-being and socio-economic goal one must not be guilty of wrongful deeds. Lest not seek to quench our thirst and satiate our hunger by drinking from the cup of bitterness and hatred. There is a need not to be drenched in despair. There is a hope-the incumbent provincial coalition government of Balochistan. It has made to realize opportunities and resources. This is the time for Balochistan to rise from the dark and desolate valley of underdevelopment to the sunlight of development and progress. The legitimate discontent in the province will not pass until there are adequate opportunities for youth languishing in pain and pangs of hunger- White Paper, issued by Government of Balochistan at its website http://www.balochistan.gov.pk.
The province [Balochistan] is fully dependent on federal transfers-White Paper issued by Government of Balochistan at its website http://www.balochistan.gov.pk
Balochistan's own tax collection continues to be paltry, although the government claims that there was "a significant improvement in tax receipts over the budgeted amount"-Revenue Authority formed in Balochistan, Business Recorder June 21, 2014.
Tax receipts in Balochistan are hardly two percent of its total revenues. For the current fiscal year (2014-15), total outlay of the budget is Rs 215 billion that shows the real predicament of this geographically largest province of Pakistan as such paltry amount cannot solve its fundamental problems of improving infra-structure and providing universal entitlements to a population that is widely scattered. Planners at federal and provincial levels are least bothered to meet this challenge, meaning by the woes of people of this province that is full of natural resources will continue, as is the case since 1947.
Balochistan is approximately 44% of the country's total land mass with the smallest in terms of population, being home to less than 5% of total population. "Balochistan continues to face the capacity issue, evident from various budget numbers. Missing targets is a norm for every budget, but Balochistan seems to take a good lead in this aspect.
The most striking part is that the provincial government managed to lock in more receipts than envisioned in 2013-14, and yet managed to post the deficit and axing the most favoured scapegoat-the development spending--at the same time"- The Balochistan Miracle, Business Recorder, June 23, 2014.
The province managed to collect Rs 3 billion in taxes last year, double the budgeted figure of Rs 1.5 billion. This a myth, exploded at the end of the write up. Balochistan is certainly not known for its agriculture, but one is shocked to see collection of tax on agriculture income-it was just Rs 500,000 for the whole year!
White Paper issued by the Balochistan government says that it had decided to bring some changes in current laws. But till today there is neither establishment of Balochistan Revenue Authority as promised in the last budget nor any effort to improve collection under two vital heads, namely, sales tax on services and agricultural income tax.
The Balochistan Finance Act, 2014 is not available on the websites of Balochistan Government or/and Provincial Assembly. We sent many requests to the Speaker of Assembly and Finance Department to place it on websites and provide us a copy for this analysis, but till today they have not done so. It is strange that legal document containing taxation measures for the fiscal year 2014-15 is not made public.
The Department of Excise and Taxation, facing serious capacity issues, collects revenue much below the actual potential. It collects the following taxes:
1. Property Tax
2. Motor Vehicle Tax
3. Entertainment Tax
4. Cinema Tax
5. Capital Gain Tax
6. Professional Tax
7. Welfare Cess
8. Hotel Tax
9. Duty on spirits
10. License Fee for sale of foreign liquor
11. Permit fee on liquor
12. Distillery fee
13. License fee on denatured spirit
14. Permit fee on denatured spirit
15. Assessment fee for sale of liquor
16. Trade Tax
The real problem of Balochistan is low tax collection from multiple taxes. Total collection from above taxes was only Rs 850 million in 2013-14, almost stagnant since 2009-2010. Tables 1.1 and 1.2 depict efforts of Balochistan in collection of revenues in 2013-14.
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Table 1.1 - Provincial Revenue Receipts
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(Rs in millions)
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RECEIPTS Budget Revised Budget
Estimate Estimate Estimate
2013-14 2013-14 2014-15
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a) Tax Receipts 1,550.796 3,234.075 3,508.676
i. Direct Taxes 1,461.076 3,146.251 3,428.435
ii. Indirect Taxes 89.719 87.824 80.240
b) Non-Tax Receipts 4,917.078 4,791.644 5,461.808
i. Income from Property and Enterprises 879.925 545.638 953.025
ii. Receipts from Civil
Administration and other Function 538.610 737.324 814.785
iii. Miscellaneous Receipts 3,498.543 3,508.682 3,693.998
Total Provincial Own Receipts 6,467.873 8,025.719 8,970.484
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It is obvious from Tables 1.1 and 1.2 that:-
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Table 1.2 - Provincial Tax Receipts
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(Rs in millions)
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TAX RECEIPTS Budget Revised Budget
Estimate Estimate Estimate
2013-14 2013-14 2014-15
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Board of Revenue
Agricultural Income Tax 2.000 0.500 0.500
Registration 75.000 90.000 95.000
Land Revenue 122.220 50.729 114.220
Stamps 244.000 210.295 244.000
Excise & Taxation
Urban Immovable Property Tax 86.000 48.377 87.720
Tax on Professions, Trades and Callings 2.700 0.289 2.700
Receipts under Motor Vehicle Acts 503.475 532.112 521.138
Sales Tax on Services - 1,806.750 1,912.630
Capital Gains Tax 0.800 3.000 3.500
Provincial Excise 404.881 376.200 417.028
Other Indirect Taxes 4.598 2.703 4.598
Transport
Motor Vehicles fitness
certificate and permit fee 20.000 28.000 30.000
Energy
Electricity Duty 85.121 85.121 75.642
Total Provincial Tax Revenue 1,550.796 3,234.075 3,508.676
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Source: White Paper issued by Government of Balochistan at its website http://www.balochistan.gov.pk
-- Progressive taxation is totally missing. Direct taxation in the form of agricultural income tax is just Rs 0.5 million and there appears no will to increase it.
-- Tax from rich property owners is not collected. Against budgeted figure of 86 million, collection was only Rs 48.3 million. On the expenditure side only 23% and 9% for educational and health, respectively. The huge grant received from Federal Government is thus going towards non-development side as evident from Tables 2.1 and 2.2:
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Table: 2.1 - Current & Development Expenditure
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(Rs in millions)
Classification Budget Revised Budget
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Estimate Estimate Estimate
2013-14 2013-14 2014-15
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A. Current
General Administration 22,025.232 20,732.287 24,762.649
Law & Order 16,236.412 18,592.363 20,280.510
Community Services 9,890.504 10,526.449 11,250.261
Social Services 41,236.000 44,071.174 48,674.147
Economic Services 25,860.495 23,676.235 28,260.928
Debt Servicing 2,099.606 1,668.215 1,821.699
PSDP 39,931.631 34,964.877 48,018.756
Outside PSDP (Federal) 14,761.527 -
Foreign Project Assistance Loans 3,981.244 1841.000 2,722.925
Cash Assistance (Japanese Grant) 0 0 0
Total Expenditures A + B 161,261.127 171031.369 185,791.876
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Table: 2.2 - Development Budget
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(Rs in millions)
Fiscal Year Budget Revised %
Estimates Estimates
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2008-09 15,745.320 15,164.956 -3.69
2009-10 18,536.322 25,441.294 27.14
2010-11 26,753.566 34,664.043 42.6
2011-12 31,367.845 33,988.848 9.8
2012-13 35,818.855 35,302.352 -1.65
2013-14 43,912.875 37,003.119 2.43
2014-15 50,741.681 Not available Not available
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Source: White Paper issued by Government of Balochistan at its website http://www.balochistan.gov.pk
Despite financial constraints, the Balochistan government increased the non-development expenditures from Rs 154 billion to Rs 164 billion in Budget 2014-15. As regards development funds, there was nominal increase in allocation for public sector development programmes from last year's Rs 43.913 billion to Rs 50.742 billion in the current fiscal year.
In a nutshell, it is not the issue of capacity but priorities. There is no will to tax the rich and spend on the welfare of the public at large. This is not Balochistan specific trend-the entire country at federal and provincial level is facing the same dilemma which, itself is related to elitist structures that need to be dismantled as pointed out by Shahid Kardar, ex-Governor State Bank of Pakistan, in Overhaul the system, (Dawn, September 16, 2014) as under:
"The elite is unwilling, even in its own enlightened self-interest, to contribute on the basis of capacity to bear the resource burden required to build a fairer society. Instead, it has instituted a social order that imbibes the feudal value system and promotes a culture of paternalistic and personal relations (in contrast to impersonal market relationships and a culture of competitiveness in other economies), nepotism and patronage, violation of the rule of law, non-acceptance of the norms of fair play and justice, etc; wrecking institutions meant for checking such excesses. Even a slowly growing middle class from non-elite backgrounds has adapted to these value systems, creating a crisis of legitimacy for the state and its institutions".
The second important issue is non-spending of allotted funds. In 2013-14, infighting among the coalition partners over attractive portfolios caused a six-month delay in the formation of the cabinet in Balochistan. The provincial government could not complete the development projects owing to delayed formation of the cabinet. "Government could not use more than Rs 2 billion for development projects"- Balochistan government unveils Rs 215bn budget for 2014-15, Dawn, June 19, 2014.
The position for fiscal year 2012-13 and 2013-14 for Balochistan is highlighted by the federal government in Economic Survey 2013-14 [see Table 3]. It exposes the claim of collection of revenue of Rs 3.234 billion by the Balochistan government during the fiscal year 2013-14. In fact it wrongly took credit of sales tax on services a direct tax, which is in fact indirect tax that was collected by Federal Board of Revenue on its behalf. In reality, it collected only Rs 1.4 billion on its own.
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Table 3: Balochistan Budget at Glance (2012-13 & 2013-14)
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(Rs in billions)
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Items Balochistan
2012-13 2013-14
(estimated)
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A. Tax Revenue 116.9 129.4
Provincial Taxes 1.2 1.6
GST on Services (transferred by Federal govt) 1.5 4.5
Share in Federal Taxes 114.2 123.3
B. Non-Tax Revenue 15.8 19.1
C. All Others 34.0 32.1
Total Revenues (A+B+C) 166.7 180.6
a) Current Expenditure 104.8 117.3
b) Development Expenditure 45.6 43.9
Total Exp (a+b) 150.4 161.2
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Source: Economic Survey of Pakistan 2013-14, Chapter Fiscal Development
Balochistan is depending entirely on funds from the federal government. Economic self-reliance is the key to political autonomy. After 18th Constitutional Amendment, the right to levy progressive taxes like wealth tax on immovable property, inheritance and gift tax is with the provinces but no Balochistan government has shown any interest in generating its own resources to rapidly develop the province and provide the people the entitlements considered as basic rights [eg right to free education under Article 25A of the Constitution] in a democratic polity.
The federal government is also guilty of not fulfilling its constitutional obligations by paying to Balochistan and other provinces their actual share of 50 percent in hydrocarbon petroleum resources as envisaged under Article 172(3) as amended after the 18th Constitutional Amendment. It is sad to note that the federal government is depriving the largest province of the country from its legitimate share in resources that are desperately and urgently needed for development and welfare of the masses.
(The writers, authors of many books and partners in law firm, Huzaima & Ikram, are Adjunct Faculty at Lahore University of Management Sciences)
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