The federal government is taking steps to increase revenue collection of the Federal Board of Revenue (FBR) and a larger share of increased tax collection would go to the provinces under the 7th NFC Award. Sources told Business Recorder here on Thursday that the issue of shares of provinces in total revenue collection came under discussion during the last meeting of Provincial Finance Secretaries held under the Chairmanship of Dr Waqar Masood Khan, Federal Finance Secretary.
During the meeting, Chairman FBR presented a brief review of the tax collection during July-November (2015-2016). Tax authorities said that as a result of various policy measures taken by the present Government, the tax collection has increased substantially and grew by 16% during fiscal 2013-14, whereas it registered a 15% growth during 2014-15. The FBR Chairman said that despite a reduction in oil prices, which hampered tax collection efforts, FBR has achieved a 24% growth in collection by taking different policy initiatives and making adjustment in the tax rates. He revealed that during November 2015, the tax collection has touched the level of Rs 230 billion as compared to Rs 180 billion for November, 2014. Tax authorities have expressed optimism to achieve current fiscal year's tax collection target of Rs 3104 billion, provided the present growth trajectory keeps its momentum and the economy overcomes any major economic shock.
Federal Finance Secretary said that the federal government is striving to increase tax collection. Under 7th NFC award, a larger share of increased collection goes to the provinces. Unless provincial governments make the surplus available the target of reducing the overall deficit of the federal government would not be achieved. He also underlined that surplus funds remain the property of provincial government and can be spent in a future period, sources quoted the Finance Secretary as saying.
The Finance Secretary explained that the primary objective of the meeting is to review fiscal operations of the provinces and sensitise them with the requirement of provincial cash surpluses for successful implementation of the ongoing Fund Programme. He expressed satisfaction on the existing level of provincial surpluses and urged them to make further efforts to meet the target set for December 31, 2015.
The Joint Secretary (PF), Finance Division, made a presentation on provincial fiscal operations and highlighted province-wise details of own receipts and expenditures during the first four months of Current Financial Year (CFY). He said that during the first four months; provinces' own receipts (combined) remained 24% of the budgetary estimates, whereas the expenditures stood 21% of BE. In the case of Punjab, it was observed that both current and development expenditures were at higher side as compared to FY 2014-15. Non-tax revenue of Sindh were observed very low (10% of budgetary estimates) as compared to other Provinces. The position of other two Provinces, Balochistan and Khyber Pakhtunkhwa (KPK), showed a normal trend. The following targets set for the provinces during the Program Review: Provinces own receipts Rs 147.9 billion; tax revenue Rs 116.65 billion; non tax revenue Rs 31.25 billion. Total expenditure Rs 840.62 billion; current Expenditure Rs 661.62 billion; development expenditure Rs 179 billion and surplus Rs 167.95 billion.
During the presentation, the Chair asked several questions related to fiscal operations of the provinces and sought clarifications/comments. The Finance Secretary Punjab said that low non-tax receipts were due to non-realisation of electricity duty amounting to Rs 16.00 billion from PEPCO. He added that the tax receipts have registered 25% growth as compared to the corresponding period of FY 2014-15. The Punjab government has taken special/new initiatives and therefore, it is difficult to implement control over them. He however assured that they would make all-out efforts towards achieving the surplus target.
Additional Secretary Finance, Sindh, said that low non-tax receipts were due to over-projection, mis-classification of receipts and ban on auction of land, etc, by the Supreme Court. The Sindh government is trying to resolve those issues. With regard to development expenditure, he said that the low expenditure was due to change in the release of funds strategy. Additional Secretary Finance Sindh expressed confidence towards achieving the surplus target.
Finance Secretary KPK admitted that the position of non-tax receipts was unsatisfactory mainly, due to non receipt of net Hydel Profit (NHP) arrears and less collection under GST (Services). He informed that the Chief Minister KPK had already set up a committee to review the situation. He said that the KPK government has allocated Rs 30 billion for local bodies. As the local bodies are settling down and relevant rules and regulations are being notified therefore, the pace of development expenditures is slow. The FS KPK assured that the KPK government would fully cooperate to attain the surplus target.
Finance Secretary Balochistan said the non-tax receipts were low due to non-realisation of expected receipts of Rs 1.5 billion for Sandak project. With regard to maintaining cash surplus, he said that there would be no difficulty to meet the target.
The Federal Finance Secretary stated that under the current situation, the surplus targets set for December 2015 could be achieved easily. He advised all the Provincial Finance Secretaries to maintain the present position and make further efforts to provide the required cash surpluses by December 2015.
The Federal Finance Secretary also inquired about the delay in the nomination of NFC member from Punjab. The FS Punjab said that a summary to Chief Minister Punjab has been submitted. He promised to check the status and inform the Finance Division accordingly, sources added.