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Shahbaz Sharif’s focus on development strategy

June 03, 2013

EGGED on by the emergence of a potential challenger — Imran Khan’s Pakistan Tehrik-i-Insaf — to its political stranglehold in Punjab, the incoming Shahbaz Sharif government in the province has started formulating its development strategy for the next five years.

Shahbaz, who is likely to be sworn in as Punjab’s chief minister for the third-term on June 6, has constituted a committee to chalk out short- to long-term strategies to execute development in the province. All future budgets will be prepared in line with the new strategies and targets for coherent development.

The committee, headed by Pakistan Muslim League-Nawaz leader Ahsan Iqbal, comprises several eminent economists and academia. It will organise a one-day conference immediately after the PML-N government is installed in the province and the recommendations formulated by the participants will be incorporated in the budget for the fiscal 2013/14, officials told Dawn last week.

"We will have about a week to fit in the proposals of the committee in the budget,” a provincial planning and development department official, who requested anonymity, said.

Iqbal had told reporters earlier last week that a Punjab development and governance conference will be arranged within days of the formation of the new provincial government to finalise long-term development policies in consultation with stakeholders. He did not elaborate who he meant by ‘stakeholders’.

A leading Lahore-based economist and member of the committee Ayesha Ghaus-Pasha told this reporter that the incoming chief minister had actually set up two committees: one for aligning the provincial development priorities (in the context of the provincial budget) with the election manifesto of the PML-N, and the other for mobilising resources (needed to implement development projects). “There is strong realisation on the part of the chief minister-to-be that greater revenues are needed for development," she said, and added the committee will also propose interventions that are required for achieving the development targets to be set for the next five years.

Officials say the chief minister-designate has already been briefed on the next budget by the finance and planning and development departments. "Initially, the finance department had proposed a core annual development programme of Rs190 billion for the next year as compared with Rs188 billion estimated for the outgoing year. However, Shahbaz Sharif had asked the budget-makers to raise the size to Rs200 billion. In addition to the core programme, the annual development programme will feature special projects worth Rs20 billion.

"Since the increase in the size of the core annual development plan will require additional funds, the incoming chief minister has directed the finance secretary to firm up a proposal for raising provincial tax revenues," a Punjab finance department official, who also didn't want to reveal his identity, said.

Punjab's own provincial tax revenue receipts for the outgoing year are estimated at Rs95 billion or just 12 per cent of its estimates of revenues of Rs781 billion.

"There are several proposals on the table to raise the provincial tax revenues," he said. The most important was about implementing tax on agricultural income as promised in the PML-N manifesto.

But it is yet be decided if the agricultural income tax will be levied on the produce or income earned by growers through their sale. If the tax is imposed on the produce, the growers will be able to shift the entire tax burden on to the consumers as is the case with all indirect taxes.

The government had collected a paltry Rs715 million as agricultural income tax last fiscal, which is currently levied in the form of land tax on landholdings above 12.5 acres with fixed rates per acre that have not been increased since 2002/03, last fiscal. The exemption to smaller landholders is also believed to be contributing to the squeeze in the revenues from this levy. Some economists believe that the province could raise collection under this tax to several billion rupees by implementing it in the income mode.

Apart from tax on income from agriculture, there are proposals to widen the scope of the provincial sales tax on services by including more services and raising the rate of this tax to 17 per cent from the current 16 per cent. The provincial sales tax on services is expected to yield above Rs40 billion this year, according to budget documents, up from Rs36.5 billion last year.

Moreover, the possibility of reforming urban immovable property tax by imposing new taxes, eliminating exemptions and raising the existing rates is also being considered. Rates of smaller taxes, like cotton fee, will also be increased and some exemptions will be withdrawn.

Still, the officials do not expect any radical changes in the provincial taxation system. "I doubt the PML-N would go for any radical, structural changes in the provincial taxation. For example, when a member of the committee had suggested an increase in cotton fee to Rs2 per 40kg, Iqbal immediately shot down the proposal because it could draw an adverse reaction from south Punjab. If they cannot do this, how will they tax the people who form the core of the PML-N vote bank in the province," said another Punjab finance department official.

A PML-N leader privately admitted that the party leadership will be especially focusing on Punjab because of rising popularity of PTI as reflected in the May 11 election results.

"Our party realises that Imran Khan could dislodge us from the province unless we deliver on our promises made to voters like improving electricity supplies, governance, etc. Schemes like free distribution of laptops and solar lamps among the youth, provision of subsidised yellow cab project, etc., launched after the PTI's first impressive show in Lahore in October 2011 have paid off this time but we need something more than that to stay ahead of PTI. Even if PTI performs better in Khyber Pakhtunkhwa than us in Punjab, it will have its impact here."

The next election, he said, will be more about the performance of the provincial governments than anything else. "Different parties are ruling different provinces, which means each will have to show that it can and is delivering from day one.