Rationalise and Restructure Provincial Taxes and Duties (RRPTD) programme in Punjab was in progress and under Subprogram-2, the tax structure and rates would be rationalised to increase annual provincial tax revenues by at least 16 percent in the budget for FY2007, said official sources.
Efforts to increase the collection of agricultural income tax (AIT) will be supported and the urban immovable property tax (UIPT) rates will be increased. The Excise and Taxation Department (E&TD) will phase-in rationalisation of the tax rate, simplify tax assessment and collection, and reduce differential tax rates between owner-occupied and rented commercial and residential properties.
Capacity development of the Board of Revenue (BOR) will ensure that the targets for taxation reform were achievable. BOR will also simplify, rationalise, and enhance the elasticity of stamp duty by reducing the number of serials and exemptions and converting flat rate duties to ad valorem duties.
Meanwhile, Reforming Provincial Finances through Fiscal Restructuring and Financial Management was being implemented under Subprogram-1. Punjab Government implemented major reforms to consolidate, restructure, and enhance collection of provincial taxes and other revenues to provide the basis for sustainable provincial revenue.
The major result was an increase in provincial tax receipts in FY2004 by more than 44 percent in nominal terms - a minimum of 12 percent was targeted.
According to recently released, "The Program and Project Administration Memorandum (PPAM)" by Asian Development Bank (ADB), describes the Punjab Resource Management Program (PRMP) with its loans and technical assistance (TA) project.
According to ADB sources, the PPAM will serve as background information on PRMP and shall serve as an implementing, monitoring and evaluation guide. The PPAM was a live document and would be updated whenever necessary. The PPAM will first describe Subprogram 2 of PRMP, its objectives, goals, components, policy framework and policy actions. It will provide details on financial aspects and especially on implementation arrangements and requirements.
Secondly, the PPAM will provide information on the PRMP TA project, which consists of (i) a TA loan (2031-PAK), (ii) a co-financed TA grant by DFID, (iii) the TA grant (TA 4520) 'Support for Subprogram 2 of PRMP', and the TA grant (TA 4734) 'Support for Subprogram 3 of PRMP'.
The Punjab Resource Management Program (PRMP) was a program cluster of loans covering the period 2003 to 2008.
According to ADB update report, the cluster was divided into 3 Subprograms. Subprogram-1 of PRMP (2030-PAK) in the amount of $200 million was successfully concluded with the release of the 2nd tranche on 27 June 2006. Subprogram-2 of PRMP (2216-PAK) in the amount of $200 million was built on the foundations laid down under PRMP Subprogram-1.
Subprogram-2 shall improve fiscal and financial governance, effective public service delivery, and private sector development leading to poverty reduction in Punjab.
The goals of the Program were to assist Punjab through reforms in governance structures, systems, and procedures to (i) provide "fiscal space" for sustainable development and improve monitoring mechanisms for effective and transparent allocation and utilisation of funds; (ii) adjust and strengthen institutional arrangements to increase the pro-poor impact of public expenditure and improved service delivery; and (iii) create a conducive environment for private sector development, growth, and income generation.
The following outputs were envisaged: (i) strengthened provincial revenues; (ii) rationalised provincial expenditures; (iii) improved effectiveness, predictability, and accountability in financial management; (iv) better strategic programming of investments for poverty reduction; (v) restructured and strengthened government, administration, and human resource development; (vi) regulatory and administrative reforms for private sector development; and (vii) reduced direct public sector involvement in economic and/or commercial operations.
Official sources explained that the major achievements under Subprogram-1 helped to change the Government's expenditure pattern by re-profiling debt, building a long-term strategy to gradually reduce the servicing of debt and increasing expenditures on high-priority social sector interventions.
Budgetary allocations for FY2005 increased over the previous year by 19.8 percent for health, 28.4 percent for education, and 591.0 percent for water supply. Allocations in the ADP for FY2005 increased over the previous year by 37.7 percent for education, 132.6 percent for health, and 167.1 percent for water supply.
REDUCE PROVINCIAL DEBT AND CONTINGENT LIABILITIES To reduce its debt burden, Punjab Government will accelerate the retirement of expensive domestic public debt. It was projected that debt servicing of interest only would be reduced from 6.4 percent of current expenditures in FY2005 to 5.0 percent in FY2006. Punjab Government was committed to establish a legal and regulatory framework for the capitalisation of both the pension fund and the General Provident Fund.
It was expected that Punjab Government would capitalise the pension and General Provident Funds with an amount of at least Rs12 billion by the end of subprogram 2.
RE-PRIORITIZATION OF EXPENDITURES TO IMPROVE PUBLIC SERVICE DELIVERY Subprogram.2 will focus on ameliorating the chronic problems of low operation and maintenance (O&M) budgets and inadequate non-salary budgets that had impeded effective service delivery outcomes and encouraged rent-seeking behaviour. In the past, O&M allocations had been less than 5O percent of current expenditures and non-salary allocations had been less than 9 percent.
Punjab Government was committed to increasing expenditure on O&M to at least 8 percent and on non-salary expenditures to at least 12 percent of current expenditures.
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