KARACHI, Feb 9: Thanks to the mysterious and confusing accounting practices of the Central Board of Revenue (CBR), the provinces perpetually suffer a shortfall in receipt of their promised share of funds.
The shortfall in release of provincial funds come in the wake of reports that CBR's collection of revenue has increased every month. Bulk of CBR's taxes are collected at the source and are of presumptive nature and hence the justification in increase of revenue collection.
But then this increase in revenue collection is not passed on to the provinces. Instead, there is a shortfall in release of funds as is now being complained by the provinces.
In last seven months, July 2003 to January 2004, Sindh reports a shortfall of more than Rs4 billion in release of the promised funds from the federal divisible pool and direct transfers from surcharges and royalty on oil and gas.
The federal budget documents stipulate total federal tax assignments for Sindh during the entire fiscal 03-04 at Rs65.90 billion. The proportionate share for seven months from this budgeted allocation comes to about Rs39 billion. Out of this promised amount, the Sindh government has been given a little more than Rs34 billion leaving a wide gap of more than Rs4 billion.
The budgetary allocation should have ensured a monthly release of Rs5.4 billion. But actually Sindh got an average only Rs4.8 billion every month. Of this about Rs2.5 billion goes to salary, pensions and group insurance premium every month. The constant increase in petrol prices and utility cost has also raised the burden on Sindh budget.
But officials in Sindh government claim to have released Rs7 billion for development in last seven months despite a shortfall in receipt of funds from Islamabad and increase in the expenditure burden because of rise in salary bill and subsidy on wheat trade.
Enquiries revealed that the provincial government had to resort to overdrafting from State Bank of Pakistan on a few occasions this year. The two such occasions were Eid after Ramzan and recent Eid when the provincial government had to borrow some money for release of salaries to its about 450,000 employees.
The federal government also does not share any information on the accounting of 2.5 per cent sales tax collection which is released back to the provinces as compensation for abolition of zila and octroi in 1999.
Well placed sources say that in the current fiscal year the indicated allocation for 2.5 GST compensation fund is Rs34.82 billion. Of this Rs21.77 billion is for provinces and Rs13.06 billion is said to be some "federal component". What is this federal component is a question said to have been raised with Islamabad several times but has remained unanswered. It has, however, helped in Islamabad conceding this amount to the provinces.
Sindh now expects to get Rs10.01 billion plus Rs3.09 billion share in federal component. On abolition of octroi and zila tax and subsequent decision of compensation, the three provinces suffered losses for continuous three years.
After an inordinate delay of more than three years, Punjab submitted audited figures of octroi and zila tax collections during 1999-00 which were much less than the provisional figures given in 1999. On the basis of these provisional figures the 2.5 per cent sales tax collection was distributed among the four provinces.
Well placed sources told Dawn that Punjab gave provisional figures of Rs9.2 billion for octroi and zila tax in 1999-00. On the basis of these figures, Punjab's share was fixed at 52.24 per cent of the 2.5 per cent sales tax collection.
Sindh's share was 38.37 per cent, NWFP 5.03 per cent and Balochistan's share was 4.43 per cent. But Punjab's audited figures of octroi and zila tax collection in 1999-00 were Rs6.11 billion.
These figures were given only last year. This changed dramatically the ratio shares of all the provinces. It has raised Sindh's share from 38.37 to 46 per cent and it brought down Punjab's share to 42 per cent from more than 52 per cent.
Balochistan and the NWFP are also among the gainers and their respective shares has increased to 6.04 per cent in case of NWFP and 5.33 per cent in case of Balochistan.
