Understanding the historical context is of utmost importance in comprehending the prevalence of regional inequality and the resulting discontent with the federal government in Balochistan.
Such disparities are primarily rooted in economic and political imbalances that arise from unequal representation.
For instance, the partition of 1971 serves as a hallmark of economic imbalances, where the Western wing received almost double in revenue share compared to the Eastern wing. This highlights the critical role of provincial autonomy in any country.
Subsequently, the 18th amendment to the Constitution, which devolved Sales Tax on Services (STS) collection to the provinces, was a sign of provincial empowerment. Following this amendment, the 7th National Finance Commission (NFC) Award was announced in 2010-11, which led to the establishment of Revenue Authorities in each province to collect STS.
The Balochistan Revenue Authority can be a game changer for the province if it is implemented transparently and effectively
Among these revenue authorities, Sindh took the lead on July 1, 2011, followed by Punjab in July 2012 and Khyber Pakhtunkhwa in July 2013. Balochistan Revenue Authority (BRA) was the last to become operational on July 1 2015. This is because the province is the most backwards because it generates fewer services and does not have enough resources to start.
Moreover, the authority faces challenges such as a shortage of tax experts and legal professionals, the deputation of staff, and reliance on Pakistan Revenue Automation Limited for automation.
Additionally, the authority has not developed its own policies and has implemented those of other revenue authorities. The absence of official reports also raises concerns.
Yet, it is imperative that the BRA office be consolidated into a singular building to optimise the authority’s operational efficiency. The office’s current scattered state hinders the BRA’s smooth functioning and necessitates the urgent implementation of a consolidated workspace. These issues must be addressed for the authority to fulfil its mandate effectively.
Generating public revenues through the collection of taxes and fees is a fundamental and indispensable means for any region to finance critical investments in human capital, infrastructure, and the provision of services for citizens and businesses. As such, the importance of a modern, progressive, effective, and credible organisation that prioritises optimising revenue cannot be overstated.
It is worth noting that the authority has made considerable progress from its previous stance. This is exemplified by the introduction of the Balochistan Development and Maintenance of Infrastructure Cess (BDMIC) in 2019, which is levied on the total value of goods imported by air, land, or sea in the province.
Furthermore, in 2022, the Balochistan Companies’ Profits (Worker Participation) Act and the Balochistan Worker’s Welfare Fund Act were also introduced, indicating a commitment to promoting worker welfare and participation.
The revenue authority may be responsible for collecting taxes, but its impact on the economy goes far beyond that. From promoting investment to enforcing regulations, the authority plays a crucial role in shaping the province’s economic landscape.
Additionally, there has been a significant increase in revenue collection. In 2014-15, the collection of sales tax services by the Federal Board of Revenue (FBR) was only Rs840 million. However, by 2015-16, the estimated and actual collections of Balochistan sales tax services were Rs1.5 billion and Rs2.2bn, respectively.
Fast forward to 2022-23, the estimated collections had increased to Rs25.2bn, with actual collections totalling Rs12.01 bn. It should be noted that the data utilised in this analysis is current up until April 2023.
Furthermore, it should also be acknowledged that the actual provincial revenue value for 2023 has yet to be determined by the relevant authority.
More deep view of the ability of BRA collection can be depicted by examining the percentage contribution of BRA’s actual collection (BSTS+BDMIC) to the actual provincial revenue for each year.
In a nutshell, the Balochistan Revenue Authority (BRA) can be a game changer for the province if it is implemented transparently and effectively. Its ability to uplift the financial status of the region cannot be overstated. However, for this potential to be realised, the government must pay attention to the needs and challenges faced by the authority.
The writer is a research assistant at the Pakistan Institute of Development Economics, Islamabad
Published in Dawn, The Business and Finance Weekly, May 1st, 2023