Budget documents hide provinces’ shares detail: Federal divisible pool
By Sabihuddin Ghausi
KARACHI, June 13: The federal budget documents for the year 2007-08 conceal a detailed, analytical and tax-wise breakdown of the provinces share in the federal divisible pool and also of the components of straight transfers, and instead gives a consolidated position of the indicated total resource transfers to each province during the coming fiscal year.
Out of the indicated Rs465.96 billion pool fund and straight transfers, the documents show an expected flow of Rs144.15 billion to Sindh during next fiscal year.
On this assumption, the Sindh government is understood to be framing up a budget of Rs225 billion plus for the next fiscal year which includes a hefty Rs50 billion development outlay.
In all previous years, the federal budget documents offered a detailed, analytical and tax-wise break-up share of every province and respective provincial shares in each component of straight transfers.
The tables showed indicated collection of every tax of the tax pool and actual recovery at the end with expected share of every province in each of this tax and actual flow of funds from every tax on the basis of the collection.
The year 2007-08 is the second consecutive year of operation of Pervez Musharraf’s resource distribution formula which in conformity with the demand of the majority province Punjab retains population as the only criterion for provincial share in the federal taxes.
Musharraf’s formula gave an additional blow to Sindh as 2.5 per cent of sales tax collection was given to provinces to compensate for the losses of octroi and export duty on merchandise goods movement.
This 2.5 per cent or one-sixteenth of total GST collection was to be distributed among the provinces on the basis of actual octroi and export duty collection in the last year 1998 when Sindh reported more than 46 per cent of total octroi collection in the entire country.
After the abolition of octroi and export tax by an entirely administrative body, the Inter-Provincial Coordination Committee, in 1998 Sindh was never given its due share in the 2.5 per cent GST.
In the initial years, the Punjab gave wrong figures and got more money from the 2.5 per cent pool. Later, when the octroi collection figures were audited and Sindh’s collection of 46 per cent was established, the federal government came out with a new formula.
Under this formula, a part of 2.5 per cent GST was distributed on the basis of population and the remaining on the basis of actual recoveries.
But since 2006-07 when Musharraf’s formula came into operation, Punjab is being given 50 per cent, Sindh 34.85 per cent, NWFP 9.93 per cent and Balochistan 5.22 per cent. Officials say in the year 2006-07, Sindh suffered a loss of more than Rs3 billion from its share in 2.5 per cent of GST being given to compensate for the loss of octroi.
Musharraf offered his resource distribution formula in the year 2005 after Punjab insisted on retaining population as the only criterion for distribution of tax pool. All three other provinces — Sindh, NWFP and Balochistan -- demand a multiple criteria for resource distribution.
They want that revenue collection, geographical size of the province and ratio with population and economic backwardness be given weight in formula of distribution of tax pool.
After taking over on Oct 12, 1999, Pervez Musharraf constituted the National Finance Commission in the year 2,000 with Finance Minister Shaukat Aziz as chairman. The NFC held initial meetings rather very late and with prolong intervals.
As the election date drew closer in October 2002, the NFC convened a series of hasty meetings, but failed to reach any consensus.
A reconstituted NFC started deliberations afresh in the year 2003 with Prime Minister Shaukat Aziz as chairman. This NFC too failed to reach any consensus. The governors and chief ministers of the provinces are said to have authorised President Pervez Musharraf to give a formula.
There was an uproar in the Senate last week in the federal budget debate as leader of the opposition, Mr Raza Rabbani, of the PPP called it unconstitutional, because according to him the President of the country has no authority to offer any formula for distribution of national resources.
The leader of Muttahida Qaumi Movement (MQM), Mr Altaf Hussain, also came out with a statement that criticised the government for ignoring demands of the provinces on the issue of distribution of federal tax pool.
Political observers and analysts expect same uproar on Friday in Sindh Assembly when provincial budget for 2007-08 will be presented on the issue of resources distribution.
While the opposition is expected to make all noises, the MQM, the dominant partner of the ruling coalition, will have no option but to remain a silent watcher. The chief minister and his partymen, minority in all calculations will have a tough time.
