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KARACHI, July 19: The federal government’s act of making at source deductions arbitrarily, prior to releasing the city government’s funds on account of a matching grant in lieu of octroi and zila tax (OZT), has resulted in a shortfall in the city government’s revenues, well-placed sources in the CDGK told Dawn.
“In spite of several appeals made to the federal government the due share was neither released in time nor in full. The funds were released after at source deductions arbitrarily, without even providing the details,” the sources observed, saying that this has added to the city government’s resource shortfall.
It is worth recalling that when OZT was abolished by the Nawaz Sharif government in 1998, the Centre had committed to providing a matching grant in lieu of the abolished OZT from the funds to be generated through the additional 2.5 per cent general sales tax (GST). But the local governments’ revenues have declined by 30 per cent as compared to what they generated in the financial year 1998-99.
Such financial constraints are causing delays in accomplishing various ongoing road and pipeline-laying projects, as a result of which the citizens are the ultimate sufferers, the sources observed.
According to a document prepared by the Executive District Officer of the city government’s finance and planning department, Naila Wajid Khan, the CDGK’s resource constraints have been aggravated further as various financial issues remain to be resolved by the provincial government.
Referring to the provincial finance commission (PFC), the document says that the PFC was set up under the Sindh Local Government Ordinance-2001 (the piece of legislation under which the local governments came into being) to institutionalise the inter-government fiscal relationship between the second and third tier of the government. It is required to distribute provincial revenues between the provincial government and the city district government.
Quoting the PFC’s report of 2002, the document said that its ultimate aim was to gradually strengthen the fiscal capacity of the district governments to facilitate them to be able to undertake their mandates for reducing poverty, raising human capital and moving towards sustainable development.
However, since the discontinuation of OZT, the local councils (now district governments) predominantly rely on federal-provincial transfers from the additional 2.5 per cent GST levied with the objective of offsetting the loss of OZT. The taluka/town municipal administrations depend on the inherited property tax and the grant they get in lieu of forgone octroi revenue, the sources said, saying that according to the PFC’s report the OZT accounted for more than 70 per cent revenues of local councils. The income from the additional 2.5pc GST, however, has been unable to make up for the forgone OZT revenue.
The document further points out that the other disturbing factor is the debt burden, which has gone unusually high because some of the departments merged with the city government brought heavy financial liabilities.
Deploring that the PFC awards have not been fully honoured by the Sindh government, it says that the non-tax receipts from the education, health and works and services departments have not been released. Besides, the funds released through single-line system for salary, non-salary and district ADP (Annual Development Plan) are inadequate, resulting in problems the in disbursements of salary and non-salary and expenditure on ADP schemes.
The document also notes with concern that the trend of releasing the share of ADP on a monthly basis has proved to be a hurdle in the smooth working, and at times due to the delay in payment the development works have been temporarily stopped.
“It would be far better if the ADP share is released on a half-yearly basis, instead of a monthly basis,” it suggests.
At the outset, the city government document advocates the need for increasing the ADP share considerably and in proportion to the city’s ever-growing population, which is growing at 6pc per annum as against the national rate of 3pc per annum, as a result of which the intensity of the CDGK’s obligatory services has increased tremendously.
