PESHAWAR, Feb 2: The NWFP government's decision to exempt owners of five marla houses from property tax has put finance managers in a difficult position as they are expecting a tough time at the hands of foreign donors requiring the government to increase its receipts.

Under a loan agreement with the World Bank, which is financing the government's multi sectoral reforms programme, the province is required to increase its income under the head of urban immovable property tax at an annual rate of 13 per cent.

In this way, according to its medium-term budgetary framework, the provincial government is committed to improving its receipts under the head from Rs269 million in the 2004-05 financial year to Rs388 million in 2007-08.

"The exemption announced for five marla houses from property tax in urban areas is not likely to go well with the donor agencies, particularly the World Bank which wants the province to improve its own revenue base," said a senior finance manager of the province.

The on-going session of the provincial assembly unanimously approved amendments to the NWFP Immovable Property Tax Act, 1958, allowing exclusion of self-occupied houses measuring up to five marlas in urban areas from the property tax net.

In accordance with the amendment, owners of houses covering areas up to five marlas, would not be required to pay property tax (only on one of their houses). Though the move has been generally welcomed by the people, especially those owning five marla houses in urban areas, the Rs50 million shortfall likely to be experienced by the province because of the step, has left the government in a difficult position to defend itself before the World Bank.

"They [World Bank] will not accept this move," apprehended another finance manager of the province. A team of the donor agency is set to start mid-term review of SAC-II (structural adjustment credit-II) from February 5.

"The issue is likely to come under discussion when the World Bank mission arrives here to review the performance of the SAC-II executing agencies," said the official. The sources in the excise department, NWFP, have also seen the move as detrimental to the department's chances of meeting the revenue target assigned under the head of urban immovable property head.