IMF (The International Monetary Fund) has again pressed Pakistan to slash provincial share under the NFC award, as the president enjoys constitutional discretion to redefine the size of the federal divisible pool.

The idea was proposed by the International Monetary Fund (IMF) as part of measures to strengthen Pakistan’s federal fiscal framework. And if the plan is brought to fruition, it would require the provincial governments to reduce their share in the National Finance Commission (NFC) Award.

The NFC Award ensures financial resources are divided among the four provinces according to the 18th amendment, which dictates that the provinces have the autonomy to manage their budgets and expenditure. The constitutional framework demands that all four provinces have to mutually agree to any change made in the NFC Award. However, the president has the final authority to revise the provinces’ shares through an executive order if they fail to reach a consensus.

Balochistan was given in millions during the half a century and couple of billion prior to the last NFC Award for its ADP. Whatever huge fund allocated for Provincial PSDP during the past five years are left at the mercy of provincial rulers and common people had no share.

On the other hand population of Balochistan has also increased but federal government’s response towards its own province was same. Balochistan is not given the due share even in its own projects which are feeding the federation with profit of billions.

At present, the four provinces get 57.5 per cent of the resources from the divisible pool of taxes under the seventh NFC Award distribution, whereas the federal share stands at 42.5 per cent. Among the four, the Punjab province gets the lion share at 51.74 per cent, followed by Sindh at 24.55 per cent, Khyber Pakhtunkhwa at 14.62 per cent and Balochistan at 9.09 per cent.

The NFC is required to be set up at intervals not exceeding five years as required under Clause (1) of Article 160 of the Constitution. The finance minister and provincial finance ministers are statutory members of the NFC. Each provincial government also has the right to include one non-statutory member.

At present, eight types of taxes constitute the divisible pool. These are income tax, wealth tax, capital value tax, taxes on sales and purchases of goods imported and exported, produced, manufactured or consumed, export duties on cotton, custom duties, federal excise duties and any other duty levied by the federal government.

Under Article 160 (6), the President can omit any tax from the pool.

It is clear that the federal and provincial governments are not concerned with the fundamental issue of judicious and even handed distribution of taxation rights between the Centre and federating units that can help the empowerment of masses and ensure prosperity for all.

The taxation rights under the prevalent constitutional scheme need reconsideration allowing provinces to raise adequate resources that will also help in overcoming overall fiscal deficit faced by the Centre. For example, Balochistan should get ‘net proceeds’ on natural gas and Khyber Pakhtunkhwa on electricity, as envisaged in Article 161(1) (a) and (b) of the Constitution.

Both at federal and provincial level arising from the absence of a political will to collect income tax from the rich-the meagre collection of agricultural income tax-less than Rs. 2 billion by all provinces and Centre in fiscal year 2017-18-is lamentable. It is imperative that the right to levy a tax on income,

including agricultural income, should be given to the Centre. In return, the Centre should hand over sales tax on goods to the provinces. This will help FBR to collect income tax of Rs. 5 trillion. It will also reduce the fiscal deficit of the Centre. This is the only way to achieve a fiscal stabilisation in Pakistan without disturbing the 18th Constitutional Amendment.