Punjab Finance Minister Sardar Husnain Bahadar Dreshak has said that there is a shortfall of 31.54 percent in the collection of both taxable and non-taxable provincial receipts by the end of the third quarter of the current fiscal year, which is mainly due to weak performance of Agriculture Income Tax (AIT).
He expressed these views in an interview with the Business Recorder here on Thursday. He said that as compared to this, last year the shortfall was 23.1 percent for the same period and saw AIT one of the causes for decline in the collection of provincial receipts.
He was of the view that due to flat rate, AIT was not contributing enough in the provincial receipts. "The contribution of AIT in provincial receipts has declined. During the FY 2005-06 up to March, collection of AIT was Rs 1.5 billion and in the current FY for the same corresponding period, it had declined to around Rs 400 million," he added.
Dreshak observed that while the big landholders were paying less tax, the small farmers were being overburdened with the tax. It has been proposed to change the existing AIT on the line of Income Tax, but it would not be practical.
Thus, he suggested for change in the formula of AIT, which should be progressive and directly proportionate to the fertility of the land. "Although it is a cumbersome to determine the fertility of a piece of land, however it could be gauged from the rent of the land, since the rent is determined by its fertility. I have already floated the formula at the concerned quarters," he added.
On forthcoming Punjab budget, he said that the existing taxes would be rationalised and implicitly implied that it would be a tax-free budget. "Moreover, more allocations would be made for the development of social sectors. There would also be a significant jump in the ADP but not to that extent that was witnessed in the last budget," he added.
While highlighting the financial performance of the Punjab government, the minister disclosed that in its tenure it has carried fiscal reforms and debt retirement strategy was part of it. He disclosed that so far they had retired Rs 18 billion of high cost loans, which provided them with a fiscal space of Rs 8 billion. "The federal government has committed more cash development loan for the retirement of loans, but the figures were yet to be determined," he added.
According to him, pension was another area that the government reformed; it has made it an off-budget item, which would lessen the burden on the government and would be handled by the professionals. When the present Punjab government took over, the pension fund stood at Rs 2 billion and it would be built up to Rs 12 billion by the end of the current fiscal year. They were planning to take the figure to Rs 100 billion in two years.
The minister disclosed that divisible pool of National Finance Commission (NFC) award between the federation and the provinces has been increased from existing 45.33 percent to 46.33 percent for FY 2007-08. "Moreover, the Provincial Finance Award (PFA) was in place and 41.9 percent of provincial revenue is distributed to districts, which amounts to Rs 108 billion. The bulk of the PFA, 83.81 percent, goes to district governments, 12.5 percent to town municipal authorities and 3.69 percent to union councils," he added.
He told Business Recorder that from the start the Punjab government had drawn a strategy to develop social sectors; initially they focused on education and for which Rs 1 billion had been allocated for its development. "Later, the health and water and sanitation sectors were also focused," he added.
On subsidies, Dreshak said that Rs 750 million worth subsidies were given to wheat, while Rs 200 million worth subsidies were allocated for sugarcane, of which Rs 100 million has been utilised.
On the utilisation of Annual Development Programme (ADP) during the current FY, he disclosed that up to March, 65-percent of the ADP had been utilised, which was an increase of three percent from last year for the same corresponding period.
"More foreign assistance was expected in the future and DFID of UK has committed Rs 10 billion with the Punjab government, which would be spent on less developed areas," he concluded.