PESHAWAR, Jan 4: The NWFP assembly’s unanimously adopted resolution seeking abolition of some of the important provincial taxes would make the province to lose around Rs400m annually.
Provincial finance managers apprehend that the move would also tarnish the government’s image in view of its commitments with the international lending agencies.
The provincial assembly on Thursday unanimously adopted a resolution recommending the provincial government to abolish property tax (on self-occupied houses), arms’ licence fee and motor vehicle tax.
The resolution was tabled by the Muttahida Majlis-i-Amal’s senior MPA, Pir Mohammed Khan and was unanimously adopted after the provincial excise and taxation minister did not resist the bid of the House.
“Being unanimously adopted, the resolution has a binding effect on the provincial government,” said speaker of the NWFP Assembly Bakht Jehan Khan when contacted by Dawn.
Provincial finance managers, when contacted on Friday, told this scribe that the resolution had caused considerable jerks in the ranks of the Muttahida Majlis-i-Amal led NWFP government.
The NWFP chief minister Akram Khan Durrani, senior minister Siraj-ul-Haq and the provincial law secretary, according to the sources, also held a meeting in this respect on Thursday, which lasted till late night for the damage control.
“The decision, if implemented, would have devastating effect,” said a senior government functionary.
Sources in the finance department told this scribe that apart from affecting the already meagre provincial resource base the decision would affect the newly set up district governments.
Out of the funds collected under the head of property tax, 85 per cent goes to the district governments and the rest is retained by the provincial government as collection charges.
The provincial government, according to provincial finance managers, collects over Rs150m through property tax annually and this time round the levy was expected to raise over Rs220m under this head.
Similarly, an equally large amount is received under the head of motor vehicle. Official sources, skeptical about the provincial assembly’s decision, said that instead of providing relief to the owners of small and old cars the decision would benefit the owners of expensive and luxury vehicles including owners of Pajero and Land Cruiser jeeps, four-by-four vehicles, etc.
Besides, the owners of self-occupied houses in the posh housing localities of Hayatabad, University Town, Nishtrabad and other localities in the urban areas would benefit the most by the provincial assembly’s decision to abolish the property tax on self-occupied houses.
The provincial government, according to its budgetary documents for the current financial year, has projected to raise over Rs3.6bn revenue through provincial own receipts, which makes just over nine per cent of the total annual receipts the province is eying to raise during the current financial year.
“With the implementation of the decision, the government would not only lose credibility it would also lose considerable tax base,” said the sources.
The decision, if implemented, said the sources, might have negative impact on the provincial government standing before the World Bank which has released $90m tranche from its structural adjustment credit facility to the province for the 2002-03 financial year.
The credit facility is extendible for a period of two more years provided the NWFP government successfully adhere to the terms and conditions of the loan agreement signed by the last provincial government.
One of the conditionalities the new NWFP government is required to comply with pertains to improving the provincial resource base by expanding the tax net during the current year to qualify for the second tranche of the World Bank loan for the 2003-04 financial year.
“The decision would hardly let the international donor agencies to trust the MMA-led provincial government any more if the resolution is adopted,” said the sources.