Sindh Budget 2009-2010

The Sindh government presented a rupees 327.18 billion budget, a 22 percent increase from the revised estimates of the current year, with total revenue estimated at 310 billion rupees, showing a budget deficit of 16.8 billion rupees. How does the Sindh government intend to tackle the burgeoning deficit?
Through oft-repeated measures that have not borne fruit so far namely reducing wasteful current expenditure associated with parliamentarians and bureaucrats, improving revenue collection, and improving the physical and social infrastructure of the province.
Qaim Ali Shah, the provincial Chief Minister who also holds the charge of Finance Minister, stated that the bulk of the increase in the fiscal receipts for the forthcoming fiscal year would be through getting arrears on account of sale of land and the release of provincial revenue held in bank guarantees. This is a reinforcement of the well -known fact that provinces have weak capacity to levy and collect taxes.
Provincial governments rely mainly on the federal divisible pool as a main source of revenue and, consequently, their own capacity to collect taxes remains extremely weak. The federal government through the Federal Board of Revenue (FBR) collects those taxes that form part of the divisible pool and distributes to each province its share as determined according to the National Finance Commission (NFC) formula.
This formula, as per the smaller provinces, requires a revisit, as it is based on population. It has been a longstanding demand of some provinces that provincial taxes collected from within a province must be credited to the account of that province alone.
What is clearly a disturbing trend noted by Qaim Ali Shah is the federal government's decision in the budget 2009-10 to levy a federal excise duty (under federal purview) on professionals in order to strengthen its own weak resource base.
This decision by the Centre was reportedly taken unilaterally and only after an inconclusive meeting between the Centre and the provinces just prior to the announcement of the federal budget on 13 June 2009 - a meeting where the viability of imposing a sales tax on professionals (constitutionally a provincial subject) was discussed. In the words of Qaim Ali Shah 'this is very unfortunate' and he termed this levy as illegal and vowed to lodge a strong protest with the centre in this regard.
Considering that the Sindh Chief Minister expressed serious reservations over this tax, the only province where PPP holds a simple majority, it is likely that other provinces' also feel this 'juggling' based on what they consider as the renaming of the tax as illegal.
It would have been preferable for the federal government to allow the FBR to collect sales tax on professionals and services on behalf of the provinces, with a fee payable for the collection, thereby allowing the provinces the impetus to move towards greater provincial autonomy. It is high time that Sindh and Punjab, two middle income provinces, begin to generate their own resources with the goal of gaining incrementally greater financial autonomy.
The federal government has already indicated that it is in the process of calling an inter-provincial meeting that would discuss the NFC award formula. While the Advisor to the Prime Minister on Finance cannot constitutionally chair the meeting yet one would have hoped that a sales tax on professionals had not been levied till after a consensus had evolved from such a meeting. The provincial government has made much of its development budget.
There is every indication that the money, if spent on various development schemes, would assist the people of the province, specifically the lower middle earners and haris. However revenue realisation by the end of the year as opposed to revenue expectation at the start of each year has forever compromised the development commitments made by the provincial governments.