A slew of tax reforms and non-development expenditure cuts have significantly boosted Punjab’s tax revenues and decelerated pace of growth in its current expense during the first three quarters of the ongoing financial year to March.
The provincial monthly civil accounts show that the Shahbaz Sharif government has collected Rs96.29bn, or around 60pc of the tax target of Rs160.59bn for the fiscal, displaying a healthy growth of 30pc over last year’s collection of Rs73.96bn, or 45pc of the budgeted target of Rs164.68bn, in the same period.
The provincial sales tax on services has shown a robust growth of 33pc with its collection spiking to Rs40.23bn — about 56pc of the budget estimates of Rs72bn for the current fiscal — from Rs30.27bn or just 31.8pc of the target of Rs95bn last year.
“We are making it easier for taxpayers to pay their taxes voluntarily, without use of force; and we think our strategy has been successful” — Ayesha Ghaus Pasha, who took charge as finance minister last year, told Dawn last week
The collection of income tax on agriculture has increased by 60pc to Rs916.834m, land revenue by 6pc to Rs8.13bn, capital value tax on immovable property by 100pc to Rs7.41bn, stamp duty by 22pc to Rs18.58bn, property tax (on transfer of property) by 14pc to Rs6.74bn and motor vehicle tax by 19pc to Rs8.42bn.
“We have achieved significant growth in tax collection by improving compliance and broadening the base without raising the tax rates or implementing new ones,” Ayesha Ghaus-Pasha, who took charge as finance minister last year, told Dawn. “We are making it easier for taxpayers to pay their taxes voluntarily, without use of force; and we think our strategy has been successful.”
On the current expenditure side, the civil accounts depict a drop of 1.17pc in the non-development spending by the provincial government as a percent of the budgeted amount and an increase of mere 5.6pc in absolute terms. The provincial current expenditure during the first three quarters stood at Rs484.41bn or 64.33pc of the budgeted estimates of Rs753bn for the entire fiscal. This compares with current expenditure of Rs458.8bn or 65.5pc of the annual budgeted estimate of Rs699.95bn.
Enabled by better management of financial resources and improvement in tax revenues, the Punjab government has been able to spike its development investment on large road, transport and energy infrastructure in the province in line with its strategy to spur economic growth to 7-8pc a year, create one million jobs in the province every year, help double private investment and eliminate terrorism from the province by 2018 — the year of next elections in the country.
The focus of the Growth Strategy 2018 is on ‘cutting poverty in the province and pushing inclusive growth’.
The provincial government had announced an investment stimulus of Rs400bn, including the core annual development programme (ADP) of Rs333bn and non-core development spending of Rs67bn, for the present fiscal. The monthly progress reports of the Punjab Planning and Development Department indicate that 70pc — Rs187.69bn — from the total amount of Rs266bn, including a foreign assistance component of Rs16.55bn, released by the provincial finance department for development projects, has already been utilised. The pace of utilisation of development funds is expected to spike more rapidly during the last quarter of the year.
The minister said the government had instituted a monitoring mechanism to accelerate utilisation of development funds to ensure improvement in social service delivery to the people of the province.
“We are trying to encourage provincial departments to spend the funds for development instead of surrendering the money at the end of the financial year.
“If we have funds to spare for development we should spend them. I want to boost development spending in a big way in the coming years.
“The passage of the 18th Amendment and increased provincial share from the federal tax resources (under the last National Finance Commission (NFC) award) mean that now the provinces have a much bigger role to play in the development of the country,” she added.
Spelling out her plans for the next year’s budget, Ayesha Ghaus-Pasha said the government planned to carry on the momentum of tax and financial reforms and implement outcome based budgeting from the next fiscal.
“Continuation of these reforms and introduction of outcome-based budget is crucial to effective utilisation of development and non-development funds, reduce dependence on federal transfers, improve service delivery and boost development spending,” she underscored.
The minister pointed out that the implementation of reforms and increased development spending do not show ‘sparkling results’ in the short-term.
“But these measures are important for long-term and sustainable improvement of public services. And I intend to carry on with reforms and boost development investment next year.”
Published in Dawn, Business & Finance weekly, May 2nd, 2016