The failure of federal government to increase tax to GDP ratio and reduce non-development expenditures are the major reasons behind the ongoing controversy over National Finance Commission (NFC) and 18th Constitutional Amendment.
This was stated by former finance minister and architect of 7th the NFC award Shaukat Tareen while speaking at Aaj TV programme 'Paisa Bolta Hai' with Anjum Ibrahim. His views were endorsed by two other members of the 7th NFC Dr Qaiser Bengali and former finance minister (Punjab) Dr Aisha Ghaus Pasha.
Tareen said that before the 7th NFC award 46.25 percent share was with provinces and 53.37 percent was with federation. However at that time octroi and zila tax imposing by provinces were asked not to impose it and federal government give 3.75 percent from its share to provinces and the end result was 50:50 percent share in the NFC.
However the 50 percent horizontal distribution among provinces was contentious as its distribution was based on population. The three provinces were terming it unfair by the Punjab. The 7th NFC realized that after the 18th constitutional amendment more responsibilities were going to provinces so major resources should also be given to them and it was one objective.
The second objective was that horizontal distribution should not be based on one point of population and needs to be based on four points including poverty, revenue generation, population and inverse population density, he added.
Tareen said that the fundamental objectives of 7th NFC award including transferring more responsibilities and resources to provinces were achieved but there was need to build on these fundamentals and remove flaws in implementation.
He said that the federal government failed on two fronts including not increasing the revenue base and cutting current expenditures. The centre failed to increase tax revenue that should have been at 19 percent instead of 9 percent of GDP within 10 years. If government had increased revenue from 9 percent to 19 percent there would have been additional revenue of Rs 4.4 trillion. Federal government would have additional revenue of Rs 1.9 trillion to meet its expenditures and that could have averted all controversies.
Tareen said that federal government also failed in cutting the non-development expenditures after transferring some ministries to provinces.
The names of ministries like health, education and agriculture were changed but they were kept and expenditures continue to this day. The Centre was supposed to also cut the losses of the state-owned enterprises which at present have touched Rs 550 billion, he added.
He further said that Benazir Income Support Pogramm /Ehsaas programm is for poor, living in provinces and should be the responsibility of the provinces and not the federal government. Federal government should handover social protection programmes to provinces.
According to the constitution some subjects should have devolved to provinces about 37 years ago and rather than blaming others and saying that 18th amendment and NFC were flawed the federal government should accept responsibility, he added.
Tareen said that provincial governments were also supposed to increase tax collection from agriculture and real estate sectors but they also failed in achieving these targets. Currently only Rs 1.6 billion is being collected from agriculture and Rs 4 billion from real estate sectors.
"There is need to increase tax to GDP ratio, savings and investment if you want to move the country forward and achieve 6-8 percent growth", he added.
Bengali while endorsing Tareen's views said the composition of 10th NFC is unconstitutional and Sindh Chief Minister has written a letter to the federal government in this regard. He said that Terms of References (ToRs) including sharing defence, debt and SoEs loses are not the right approach. If his (Bengali's) principle is accepted the list would further widen and will make the federation weaker and rather a confederation.
Replying to a question Bengali said that some services should be the flagship programme of the federal government to give the justification and impression of being a federation. Ehsaas/BISP should remain with federal government, he added. Dr Ayesha Pasha said that the current controversy and campaign is aimed at further 'elite capture'.
To centralize revenue would lead to reduction in expenditure for public betterment and development, she added. She further said asking provinces for surplus budgets is a way to hide federal government inefficiencies. Surplus is provinces money and should be used for public related sectors development including education, health, she added.
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