Tax pool: Provinces receive 43% of their share in taxes

Show surplus budget in first half as Centre transfers Rs646b.

ISLAMABAD:

The federal government’s payments to provinces on account of their share in taxes have so far remained largely in line with projections, allowing the four federating units to show surplus budget in the first half of the current fiscal year.

From July to December 2013, the Centre transferred Rs646.5 billion or 43% of annual commitments made under the National Finance Commission (NFC) Award to provinces, according to a fiscal operations summary released by the Ministry of Finance on Monday.

Ideally, the ratio should have been 45%. There was a gap of about Rs30 billion between the projections and actual transfers due to less than anticipated tax collection by the Federal Board of Revenue.

For the current fiscal year 2013-14, the government expects to disburse Rs1.502 trillion to the provinces as per their share in tax revenues. Under the seventh NFC Award, the provinces will get 57.5% of total tax collection in the year.



In the first half, the FBR collected Rs1.03 trillion in taxes, of which Rs646.5 billion or 62.6% was transferred to the provinces. Additional transfers were because of commitments to Khyber-Pakhtunkhwa and Balochistan governments. This amount has nothing to do with the share of provinces in taxes, pledged under the NFC Award.

Province-wise breakdown

Punjab received Rs286.5 billion or 40.4% of its share of Rs708.7 billion. Sindh got Rs179.3 billion or 44.8% of its share of Rs400 billion, Khyber-Pakhtunkhwa received Rs106.8 billion or 42.2% and Balochistan got Rs74 billion or 52% of its annual share of Rs142 billion.

Budgets of the four provinces remained in surplus due to delay in disbursement of their respective shares until the deadline. This resulted in accumulative savings of Rs164.7 billion by all the four provinces in the six-month period, helping the federal government to borrow less from banks to finance its current expenditures.

The Punjab government showed surplus of Rs53.9 billion, Sindh Rs44 billion, Khyber-Pakhtunkhwa Rs32.8 billion and Balochistan Rs34 billion.

The federal government posted a budget deficit – the gap between expenditures and income – of Rs693.9 billion or 2.7% of gross domestic product. The savings of Rs164 billion by the provinces helped the Centre to restrict the national budget deficit to Rs540 billion or 2.1% of GDP, according to the summary.

To bridge this gap, the government borrowed Rs583.5 billion from domestic banks and national savings schemes. It borrowed Rs43.5 billion over and above the deficit in an effort to bridge the gap between fresh foreign loans and matured debt repayments.

In the six months, the government received Rs128 billion in fresh loans and returned Rs171.5 billion of previous loans, said the finance ministry.

Published in The Express Tribune, February 18^th, 2014.

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