Net federal transfers: government''s estimates appear to be unrealistic

Federal government estimate of net federal transfers to the provinces from divisible pool appears to be unrealistic as an expected shortfall collections would subsequently reduce provinces'' share. Sources in Finance Ministry said that performance of tax authorities during the last few years was not encouraging and successive tax collection target targets given to them by the Finance Minister were missed. They further stated on condition of anonymity that revenue collection always remains an issue because all the estimates revolve around budget deficit and to achieve the target of deficit, finance ministry outlines other projections which frequently prove unrealistic.
They added that like in the previous year, this year too net transfers to the provinces are premised on FBR collections in the divisible pool and failure on the part of tax authorities to achieve the target would eventually reduce transfers to the provinces, which in turn would affect their budgetary estimates of the current fiscal year. The federal government has estimated Rs 1.992 billion net transfer to the provinces on the basis of ambitious tax collection target of Rs 3,103 billion.
A senior official said the federal government has budgeted Rs 776 million on account of GST on services on behalf of Balochistan province because the province has lately established its revenue authority but has yet to start collections. Other provinces, the official added, have established their revenue authorities and boards and are collecting GST on services. He said it is difficult to state whether the amount would be realised or not.
The provinces'' share in the federal taxes and straight transfers witnessed a significant decline during the last fiscal year and the provincial share from straight transfer especially from royalty on natural gas as well as royalty on crude oil. This trend downward trend like in the previous year may continue. Last year, Punjab''s share was reduced to Rs 751 billion from the budgeted Rs 812 billion, Sindh''s Rs 413 billion from the budgeted Rs 464 billion, Khyber Pakhtunkhwa to Rs 254 billion from Rs 283 billion and Balochistan province''s share was slashed to Rs 154 billion from the budgeted Rs 159 billion.