LAHORE, June 20: The Punjab government will undertake a massive exercise during the next financial year beginning on July 1 to overhaul the provincial taxes to make them more “vibrant and increase their yield”. The taxes that are to be revamped include the agriculture tax, general sales tax (GST) on services, urban immovable property tax (UIPT), professional tax, stamp duty and motor vehicle tax (MVT).

The Punjab government intends to overhaul the provincial taxes under the five-year Punjab Resource Management Programme (PRMP).

The $500 million programme is being financed by the Asian Development Bank (ADB), and aims to improve public finances and reform financial and fiscal management in the province.

Under the PRMP the provincial government also plans to enhance its non-tax revenues and user charges.

The Punjab government is trying to enhance the size of its own (tax and non-tax) resources in order to reduce its reliance on the federal transfers of funds under the NFC dispensation.

“Our effort to mobilize the provincial resources is restricted by a very low tax base,” say Punjab finance department officials. In the recent years the provincial finance managers have begun to consider the possibility of reducing the province’s dependence on the federal transfers as much as possible. One way of doing so is to improve province’s own resource base. In addition, the finance department officials don’t hope to gain much if and when the next National Finance Commission (NFC) Award is announced.

“Maybe we get an additional resource of Rs4-5 billion when the award is finalized. As much can be generated by improving our own tax and non-tax revenues,” a senior official told Dawn on Monday.

The provincial tax revenue (including devolved property tax of Rs4 billion) estimated for the next fiscal year is only 11.48 per cent of the total budget size of Rs224.409 billion.

Similarly, the non-tax revenue (including Rs3.275 billion to be received on account of royalty — being demanded by the Punjab from Islamabad, and also indicated in its budget documents — from Ghazi Barotha Hydropower project) has been estimated at Rs14.8 per cent of the total budget outlay.

Thus, the share of the province’s own tax and non-tax resources of Rs58.895 billion is calculated to be around 26 per cent of the total revenue estimated for the next year. This compares with the provincial share of 18 per cent in the total budget outlay during 1999-2003.

The provincial finance department officials believe that “some of the provincial taxes can yield far more revenues than they are at present.”

“Take the example of the agriculture tax, the budget for the next year has indicated an income of Rs1.312 billion from it. Our estimate is that we could generate Rs6 billion from it just by revamping it,” insists an official.

The exemption from the agriculture tax given on landholding up to 12.5 acre provided people a legal loophole to avoid paying the tax at all, he says.

“The collection under this head can rise manifold should we do away with this exemption or impose the tax on income,” he says.