THE NWFP government is working on a provincial autonomy bill to widen the tax base. A provincial committee has been set to prepare recommendations. The bill will be tabled before the National Assembly, jointly with bills from other provinces , to enlarge the revenue base of the federating units.
In its preliminary session, the committee has proposed that the provincial government be allowed to collect professional tax from the cantonment areas besides bringing the provincially-administrated tribal area (PATA) into the tax net.
Professional tax has proved to be a bone of contention between the NWFP government and the cantonment boards, which collect such levy from the cantonment areas in violation of the 1973 Constitution.
Article 163 of the Constitution authorises the province to collect professional tax from areas falling within the jurisdiction of a cantonment.
But, at the same time, the cantonment boards also have an SRO of the ministry of defence issued on October 12, 2004, empowering them to collect such tax from the areas falling in their jurisdiction under section 60 of the Cantonments Act, 1924 (II of 1924).
The traders and shopkeepers in cantonment areas are the ultimate victims of this dispute of authority between the two governments.
Shopkeepers say cantonment boards are collecting professional tax from them, while at the same time the Excise and Taxation Department (E&TD) is also demanding the same tax from them.
"This situation has compelled the traders to pay dual taxes because none of the two entities are ready to withdraw from their stand," Sharafat Ali Mubarik, general secretary of the Markazi Anjumen-i-Tajiran, NWFP, says.
Financial managers of the MMA government consider the province a big loser of ongoing standoff, as they say the E&TD is facing huge shortfall in recovery against professional tax annually when this levy has great potential to grow.
They argue that most of the business centres in urban areas of the province are located within the jurisdiction of cantonment areas that can contribute to the provincial kitty significantly.
“Last year, the provincial government had collected Rs84 million against professional tax, however it can be doubled, if such a dispute is resolved," another senior official of the tax-collecting agency said.
The Frontier government had twice taken up the issue at the Inter-Provincial Coordination Committee (IPCC) , but the exercise proved to be futile, as no final decision has been taken so far.
The official, however, says the issue is now being taken up through its recommendation for the proposed legislation that would, hopefully, help in its resolution.
Apart from getting control over collection of professional tax, the NWFP government is also trying to get the extension of a number of provincial taxes to PATA for expanding its revenue base.
The successive governments had endeavoured for bringing such semi-tribal areas into the tax net, time and again, but they did not succeed because of many legal implications, explained the officials and added now the issue would be incorporated in the recommendation for the proposed bill on provincial autonomy.
Under article 247 of 1973 Constitution, the provincial government has been given the executive authority of the PATA; however, no act of parliament or a provincial assembly can be applied to PATA, or to any part thereof.
Areas falling under PATA, including Malakand, Swat, Buner, Dir (Lower), Dir (Upper), Chitral, the tribal area in Kohistan district, the tribal area adjoining Mansehra district and the former state of Amb are exempted from all type of federal and provincial taxes.
The exemptions from taxes have made these areas as a hub of duty- free vehicles, as according to official estimates more than 80,000 such vehicles are plying in areas comprising PATA.
"We are recommending to the federal government to allow the provincial government to extend provincial taxes to such semi-tribal areas so that it could widen its revenue base," say the official.
He argues that these areas have lot of potential of various types of provincial taxes that can help enlarge the provincial tax base. The areas have hundreds of small industrial units in addition to the hotel industry, which can serve as avenues for increasing the provincial tax base.
Bringing such areas under tax net, explains the official, will enable the tax-collecting agencies to announce amnesty period for regularising non-custom paid vehicles that will substantially contribute to the national exchequer and legalise thousands of illegal vehicles.
A final report on provincial government’s recommendation for the proposed legislation is expected to be ready by Aug 15.