ISLAMABAD: Punjab is set to get the lion’s share from the federal divisible pool of taxes in the next fiscal year, the sum almost equal to the share of the other three provinces.

According to the budget document for the next fiscal year, Rs5.27 trillion in taxes will be transferred to the provinces. The share has gone up from Rs4.12 according to revised estimates of the previous fiscal year.

Of the Rs5.27tr to be transferred to the provinces in the next year, the constitutional share of Punjab will come to Rs2.62tr (49.72pc).

Sindh’s share will be Rs1.30tr (24.67pc), followed by Rs866.75bn (16.45pc) for Khyber Pakhtunkhwa (KP) and Rs479.05bn (9.08pc) for Balochistan.

The procedure for the distribution of resources among the provinces has been outlined in Article 160 of the Constitution, which provided for the setting up of the National Finance Commission (NFC) with intervals not exceeding five years.

Total amount increased to Rs5.27tr for FY24

The mandate of the NFC is to make recommendations to the president for the distribution of resources between the federal and provincial governments.

Under the relevant provisions of the President’s Order No 5 of 2010, as amended in 2015, the taxes in the divisible pool consist of income tax, wealth tax, capital value tax, taxes on the sale and purchase of the goods imported, exported, produced, manufactured or consumed, export duties on cotton, customs duties, federal excise duties, excluding excise duty on gas charged at well-head, and any other tax that may be levied by the federal government. Under the order, 1pc of the net proceeds from the divisible pool taxes shall be assigned to the government of Khyber Pakhtunkhwa to meet the expenses incurred as a result of the “war on terror”.

Each of the provinces is to be paid in each financial year as a share in the net proceeds of the total royalties on crude oil, an amount which bears to the total net proceeds the same proportion as the production of crude oil in the Province in that year bears to the total production of crude oil.NFC recognises that sales tax on services a provincial subject under the Constitution and they are empowered to devise a mechanism for its collections.

Published in Dawn, June 10th, 2023