May 10, 2005	Tuesday	Rabi-us-Sani 1, 1426

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BHURBAN, May 9: Sindh has given up its demand for having revenue collection as one of the criteria for horizontal distribution of resources (among the provinces) under the Sixth National Finance Commission Award, apparently removing a major irritant. Adviser to the Prime Minister on Finance and Revenue Dr Salman Shah told reporters that Sindh was now demanding that personal income tax collection should be given some weight in the resource distribution formula instead of total revenue collection which now seemed acceptable to other provinces.

He said three issues - sharing of gas development surcharge, revenue collection and transfer of 2.5 per cent GST in lieu of formerly Zila tax - hampered the finalization of the award up to now. He said amounts were not significant but principles were obviously more important on these issues.

On vertical distribution of resources (between centre and provinces), he said the provinces were demanding 50 per cent share while the centre had offered 47 per cent. “The gap is not big and can be bridged in a gradual manner,” he said, adding that in this way both the federal and provincial governments would get sufficient resources to meet their requirements.

An official requesting anonymity explained that Sindh wanted two per cent weight to be given to personal income tax and retail sales tax because the two “have very clear and audited accounts”.

He said it was difficult to give weight to overall revenue collection which amounted to about 69 per cent of the national collection and involved a number of national derivatives but personal income tax and retail tax had confirmed statistics from where these are generated.

The official, who has been involved in the NFC deliberations, said that Sindh finance minister Syed Sardar Ahmad had provided to his Balochistan counterpart Syed Ehsan Shah a package of Gas Development Surcharge distribution, involving a number of formulas.

Mr Shah said the differences among the provinces on the NFC award had been narrowed down. He hoped that a consensus will emerge in the next two weeks.

He was talking to newsmen at a reception hosted by Punjab Finance Minister Sardar Husnain Bahadur for the participants of a two-day executive programme on inter-governmental finance, provincial finance commissions and decentralization.

The programme has been organized by the Punjab government and Asian Development Bank under the “Decentralization support programme”, an initiative for the capacity-building of provincial finance commissions.

Dr Shah said if the provinces failed to finalize NFC within two weeks, the federal government would be bound under the constitution to continue with the existing award.

Replying to a question, he said the forthcoming national budget for the year 2005-06 would be “people-friendly and investment-friendly” and its size would be more than a trillion rupees.

Punjab finance minister Husain Bahadur welcomed the delegates and said the purpose of the programme was to provide knowledge on important concepts and practices in intergovernmental finance to senior decision-makers.

“Intergovernmental finance is at the heart of improvement in service delivery, poverty reduction and development of Pakistan and its provinces,” he said.