KARACHI, Dec 27: Instead of reframing their economic policies to share financial burden at national level, provinces have became complacent on getting larger share in divisible pool given under 7th National Finance Commission Award.
Similarly, the federating units have also failed to put in place enabling environments necessary to attract foreign and local investment after getting right over their mineral resources given under 18th amendment in July 2010.
These core issues are being raised at different official levels and by tax experts who feel that the current economic woes and financial crisis are directly linked with factors which otherwise could have resulted in prosperity at grass-root level and economic stability.
These tax experts further stated that even energy crisis is also directly related to these changes because under Article 172(3) of the 18th Amendment, mineral resources are being shared on 50:50 basis by provinces and the federal government.Even on getting licences from the federal government, oil and gas exploration companies have to get right of exploration from provinces where required systems and laws are yet to be framed, tax consultants added.
This could be verified from the fact that during the last two years there had been no oil exploration in the country because investors who have to run from pillar to post are reluctant to take risk.
Increase in share for provinces from the divisible pool to 57 per cent and federal government 52.5 per cent under 7th NFC award, they said, should have otherwise made the federating units hub of economic activity but it turned out to be contrary to expectation because getting easy money made provinces complacent.
This could be verified from the fact that even today tax-to-GDP ratio of provinces stands as low as 0.5 per cent against 6 per cent of Indian states.
Against this federal government’s tax-to-GDP ratio stands at 9 per cent and of India 12 per cent which takes total at 9.5 per cent and 18 per cent respectively.
These experts said that there is an urgent need that provinces should improve their tax collection ratio by broadening the tax net and evolving systems based on IT methods.
Had there been an efficient and focused approach towards taxation by the provinces, the federal government would not have resorted to massive borrowing which took budget deficit to 9 per cent or Rs1,800 billion borrowing from the State Bank and commercial banks last fiscal year.
Qazi Anwar Kamal, a tax consultant, said that the economy of the country has the potential to give revenue budget up to Rs4500 billion provided tax laws are simplified and distortions are removed by revisiting those SROs and circular which give concessions, exemption or reduction in tax rate.
He further stated that these SROs and circulars are also against Article 25 of the Constitution for being discriminatory. According to SBP, the revenue loss on these SROs is to the tune of Rs175 billion per annum.
He also suggested that tax return form should be simple and on one page against the current bulky return which confuses taxpayer.
Citing an example, he said there are around 4 to 5 million retailers in the country but are not paying tax because exemption on turnover up to Rs5 million gives them cover and it should be immediately withdrawn.
Imran Ahmed Khan, another tax consultant, said that to check tax evasion and dodging, banks should have connectivity with field formations so that each transaction of sale and purchase could be monitored by tax hounds.
If the National Accountability Bureau (NAB) could get bank statements, as to why tax department could not have the same facility under the law to verify sales and purchases of an enterprise or an industrial establishment.