Provinces to get Rs450bn from federal divisible pool
By Khaleeq Kiani
ISLAMABAD, May 30: The centre would transfer about Rs450 billion to provinces as their share of the federal divisible pool and grants during the next financial year (2007-08). The amount is about 30 per cent higher than the current year’s budgeted estimates of Rs350 billion.
The size of net proceeds of the divisible pool has been estimated at about Rs970 billion for the next year, after estimated deductions of collection charges and direct fiscal transfers to the district governments under 2.5 per cent general sales tax in lieu of octroi and district tax, sources in the finance ministry told Dawn on Wednesday.
They said the federal government has conveyed to provinces the size of their share of the divisible pool for the next year at Rs451 billion and has asked them to prepare their budgets on the basis of these estimates. This does not include project aid and other straight transfers to the provinces.
The federal government’s share next year would be 57.5 per cent, against 58.5 per cent during the current year. Additionally, the federal government also gets away with five per cent collection charges on divisible taxes.
The share of Rs451 billion, however, also includes Rs35 billion subventions to be provided to provinces. The NWFP would be the highest recipient of the subvention pool with a grant of about Rs12.3 billion, the sources said. Under the interim National Finance Commission award, the NWFP is entitled to have 35 per cent share of the subvention pool, followed by 33 per cent to Balochistan, 21 per cent to Sindh and 11 per cent to the Punjab. The pool progressively increases with growth of net proceeds of the divisible taxes.
The sources said the provincial share in the federal divisible pool for the next year would be 42.5 per cent. However, their share would go up to about 46.5 per cent after including grants-in-aid and subventions. Divisible taxes like income tax, wealth tax, capital value tax, sales tax, customs and excise duty form part of the divisible pool.
Out of the sum assigned to the provincial governments, an amount equal to the net proceeds of one-sixth of sales tax collection is distributed among the provinces for onward transfer to district governments and cantonment boards at the rate of 50 per cent to Punjab, 34.85 per cent to Sindh, 9.93 per cent to the NWFP and 5.22 per cent to Balochistan.
The remaining net proceeds are distributed among the provinces on the basis of their respective population. As such, Punjab takes away 57.36 per cent share, followed by 23.71 per cent Sindh, 13.82 per cent NWFP and 5.11 per cent Balochistan.
Balochistan’s share would go beyond Rs52 billion including subventions and share of the general sales tax directly going to the districts, compared with its current year share of about Rs32 billion.
