Punjab govt’s fiscal situation deteriorates

Published December 28, 2018
The current expenditure of the province has gone up by 17.9pc to Rs407.9bn from Rs345.7bn a year ago. ─ Photo courtesy Usman Buzdar Twitter
The current expenditure of the province has gone up by 17.9pc to Rs407.9bn from Rs345.7bn a year ago. ─ Photo courtesy Usman Buzdar Twitter

LAHORE: As the government moves to bridge a growing revenue shortfall, another problem may be brewing in the fiscal accounts as the estimated revenue surplus from the provinces could come in below the estimated Rs285.6 billion.

Punjab is already showing a slowdown in its revenue collection for the first five months of this fiscal year. In the period July to November, the provincial civil accounts show that the government has been able to collect Rs74.9bn, or 27 per cent of its total tax target of Rs275.8bn for the year. In the same period last year, the provincial revenue authorities collected 33pc of their annual target. Additionally, the province is also struggling to meet its non-tax revenue target, raising just Rs18.1bn, down from last year’s number of Rs46.9bn.

The shortfall will force the Punjab government to make a hard choice: either cut the already small provincial annual development programme of Rs238bn or bridge the shortfall from the Rs147.8bn cash surplus it had promised to help Islamabad keep down consolidated fiscal deficit.

Finance department officials of the provincial government estimate that there is a deficit in federal transfers under the National Finance Commission award of up to Rs20bn in the same five months. Moreover, the estimated payment of net hydel profits, including arrears for the previous years, of Rs41.2bn also appear unlikely because of the financial troubles of the federal government. The officials are expecting only a partial reimbursement of the profits at the moment.

Revenue collection falls as current expenditures rise

Compounding the difficulties, the current expenditure of the province has gone up by 17.9pc to Rs407.9bn from Rs345.7bn a year ago. Little wonder then that the Buzdar government has already slashing public development spending, which stood at Rs51.6bn compared with Rs157.1bn spent on development schemes in the corresponding months last year.

“The shortfall in provincial tax collection is broad-based” conceded an official who spoke on condition of anonymity. “The suspension of services tax on mobile telecom companies by the Supreme Court in May is the single most important factor behind low provincial sales tax this year. Sindh is also suffering losses because of this. We are hopeful that the court will restore the levy in its next hearing, allowing us to make up for the loss before the close of the financial year.”

He said the Punjab Revenue Authority responsible for collecting provincial sales tax on services was also making efforts to partially make up for the losses on account of the suspended services tax on mobile telecom companies by improving collection from other service providers. “We have brought life insurance in the purview of the provincial sales tax and increased the rate of the levy on construction services. Besides, we are expecting recovery of unpaid tax of Rs5 billion from NBP this year. We expect these measures to somewhat fill the hole in the services tax revenue (caused by the court decision).”

When contacted, provincial finance minister Makhdum Hashim Jawan Bakht said the government was committed to meeting all its budget targets from tax collection to development spending to production of cash surplus (as required by the federal government) and had instructed the departments concerned to expedite development spending. “We have met our 100-day targets and now plan to ramp up revenue mobilisation. We intend to meet our targets and we will.”

Published in Dawn, December 28th, 2018

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