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THE federal government has yet to announce the Eighth National Finance Commission Award. One hopes the performance of the previous one was examined closely and lessons learned from the shortfalls. Apart from a number of targets missed, three major agenda items remained unfulfilled.

One of the major failures in targets missed was the collection of taxes. The target was 15per cent tax-to-GDP ratio by the terminal year of the award (2014-15) and a one per cent increase from then onward. The actual achievement during the five-year period was 11pc.

The award had envisaged that both the centre and the provinces would tap the tax collection potential in different sectors. The total agricultural income tax collection during the award period was only Rs1.6 billion while a mere Rs4bn was collected as property tax.

The third major failure of the centre and the provinces under the 7th NFC Award was the maintenance of fiscal discipline. The total expenditure of provinces (against revenue) witnessed an average negative growth of 16pc during the five-year period. Similarly, the federal government’s total expenditure recorded an average negative growth of 13pc by the end of the award period.

It is important that lessons are learnt and the centre and the provinces show better performance in the Eighth NFC award.

Muhammad Azam Shaikh

Published in Dawn, April 14th, 2019