KARACHI: Sindh Chief Minister Murad Ali Shah on Monday called for revisiting the National Finance Commission (NFC) award’s criteria.

Presiding over a preparatory meeting, he worked out the case of his province in consultation with the finance, planning and development departments and the Sindh Board of Revenue (SRB) to be presented at the NFC meeting in Islamabad on Feb 6.

The 16 points to be taken up pursuing the Sindh case at the NFC meeting include increasing the ratio of weightage from population to performance and revenue generation, collection of tax by the Federal Board of Revenue (FBR) on wholesale and retail sales, sales tax on goods be assigned to SRB on behalf of the FBR and retain service charge.

Similarly, the Capital Gains Tax (CGT) on immovable property collected by the federal government should be devolved to the provinces in the spirit of the 18th Amendment.

Says he will present 16 points at a meeting in Islamabad on Feb 6

A joint committee of federal and provincial governments with international experts should be set up for rationalisation of federal and provincial tax collection, broadening the tax base at both levels, eliminating duplicate taxation and study on revenue generation.

Likewise, the Gas Infrastructure Development Cess (GIDC) needs to be transferred to the provinces as it is a provincial subject and the Sindh government should also be given its due share from the amount collected by the federal government under the GIDC so far.

Similarly, excise duty on crude oil and natural gas as per Article 161 of the Constitution needs to be devolved to the provinces and its rate be enhanced because in the 7th NFC award it was fixed at Rs10 per MMBTU which should be charged ad valorem.

Tax reforms

The FBR tax revenue projection should be on net of all refunds allowed / paid and not on gross basis as FBR withholds refunds to inflate their receipts. The FBR make necessary adjustments owing to refunds after the end of a financial year which affects the cash flow and budgeting of the provinces as such the FBR should be penalised for not achieving the projected divisible pool taxes.

The provinces should be consulted while granting concessions, reducing sales and other taxes on a particular industry, waiving or changing tax rates. The tax expenditures should be reduced, as they alter horizontal and vertical equity of the basic tax system.

Special pool

Highlighting the need to oppose special pool, the chief minister said the federal government insists that 7pc of the total divisible pool be made part of a special pool for the social sector and expenses on security but the Sindh government could not accede to this proposal because Khyber Pakhtunkhwa (KP) was allowed an additional one per cent share on account of its losses in the war on terror. However, most of the terrorists moved to Karachi, causing the provincial government to enhance manifold its expenditure on security.

He said that Article 148 of the Constitution requires the federal government to maintain law and order. Therefore, Mr Shah called upon the federal government for reimbursement for its extra outlays on security.

The tribal areas have now become part of KP and the province stands to gain in the NFC award on account of an increase in its population and under Article 161, the provinces’ share cannot be reduced in the divisible pool.

Published in Dawn, January 29th, 2019