LAHORE, May 26: Finance Minister Shaukat Aziz on Wednesday sought to play down the demand of the provinces to increase their share in the divisible pool to 50 per cent , insisting that inter- provincial disputes were to blame for the persisting stalemate in the National Finance Commission (NFC).
"The provinces have different points of view on various issues and this difference of opinion is hampering finalization of sixth NFC award. The provincial share from the divisible pool is not an issue," he said in response to a query by this reporter.
"Sindh wishes revenue collection to be inserted in the formula for resource distribution between provinces, others do not agree. Then there's a dispute on the formula for distribution of 2.5 per cent sales (in lieu of octroi/ZT) among the federating units, and a disagreement between Sindh and Balochistan over sharing the Gas Development Surcharge (GDS)," the minister said.
Punjab is sticking to its stand of retaining the population of provinces the only criterion for resource distribution and sharing 2.5pc sales tax among them. Yet Mr Aziz did not rule out the possibility of finalizing the award before the presentation of the budget for 2004-05. "There's ample time. Informal talks to hammer out differences (between the provinces) are still on."
The next fiscal year would be the eighth year of the fifth NFC award if the sixth award is not finalized in the next few days. It may be recalled that difference between the provinces, especially Sindh and Punjab, on the resource distribution formula as well as the provinces' demand for greater share in the divisible pool has already dashed Mr Aziz's hopes of announcing what he used to call as a "consensus award" by March 31.
Answering another query if Islamabad intends to enhance provincial share in the tax pool to 50 per cent, he ruled out the passability. The PM has already made an offer (to the provinces), he added, referring to the centre's decision to increase the provincial share to 47.4 per cent inclusive of 2.5pc provincial sales tax levied in lieu of octroi/ZT and subventions that currently amount to Rs9.85 billion.
All the provinces, especially Sindh, are nevertheless want the federal government to enhance their share from the divisible pool to at least 50pc, exclusive of subventions, special grants and 2.5 per cent provincial sales tax.
Under the existing award, the provinces get only 37.5 per cent share from the tax pool exclusive of subventions and 2.5 per cent sales tax. Islamabad, which deducts five per cent from the entire tax collection that form the pool as collection charges, gets the rest.
Persons privy to the NFC deliberations feel that a "fair award would be the one that allows the provinces a substantial share in the pool and evolves a mechanism of subventions to attack poverty in all federating units".
The centre's offer to increase the provincial share in the tax pool to 47.4 per cent by making 2.5 per cent provincial sales tax part of the pool and abolishing subventions means that they would get only 3.7 per cent more than what they are currently getting.
Officials say the provinces are already getting 43.7 per cent, if subventions and 2.5 per cent sales tax are also seen as a part of their share from the pool.
The province are demanding increase in their share with a view to effectively attacking rising poverty, provide better education and health services, bridge the gap between their expenditure and resources and support the devolution of power.