Reminding Islamabad of its constitutional and fiscal mandate

For decades, Pakistan’s federal government has been confusing and confounding its own role under the Constitution vis-a-vis the economy and tax collection.

Let’s revisit history. The Lahore Resolution of March 23, 1940 is the basis for Pakistan. It declared that four provinces to the North-West (and of course east Bengal) would become sovereign and autonomous, with only three subjects, i.e. foreign policy, defence and customs, under a federal government. Very soon, however, two highly centralised Constitutions – 1956 and 1962 – were bulldozed through conspiracies. After losing half the country, a new beginning was initiated by Shaheed Zulfiqar Ali Bhutto in 1973 (faithful to the original 1940 resolution). Sadly, since 1977 (General Zia coup), this Constitution has been mauled and disfigured by dictators/hybrid political regimes.

In 2010, the PPP (during President Zardari’s tenure) catapulted the 1973 Constitution to its original moorings (although more strengthening remains to be done) through the 18th Constitutional amendment. The seventh NFC award (in 2010) also transferred a chunk of resources to the people in provinces, instead of earmarking it for Islamabad.

Over the last 14 years, the provincial governments have lived up to promises made under the 18th amendment and the seventh NFC Award, by increasing their tax collection (although they have limited tax base). The federal government has miserably failed to increase its own tax-to-GDP ratio to 15%, or implement devolution under the 18th Amendment.

During the recent election campaign, PPP Chairman Bilawal Bhutto Zardari had declared that 17 federal ministries (dealing with provincial subjects) would be abolished at the federal level if the PPP was to form government in Islamabad. The PPP wanted to curtail wasteful administrative expenditure and spend the funds thus saved on the welfare of the people.

It must be reminded, emphasised and reiterated time and again that the federal government has been created by the provinces to perform only five major functions: tax collection, foreign policy, defence, regulation of import-export, and construction of strategic highways. The federal government has no other major function mandated under the constitution. All other matters belong to the provincial governments and Council of Common Interests (CCI).

The federal government has turned its constitutional role upside down. Instead of focusing on the collection of taxes (and assign to the provinces), it has instead created parallel and bloated ministries/divisions/corporations on matters that are under the purview of the provinces or the CCI.

Let us be totally clear. The Constitution mandates the federal government to collect taxes on behalf of the provinces through implementing an efficient tax collection system. Instead of performing its core function, it is appropriating these funds. Thereby leaving the source of the funds – the citizens of the provinces – in the lurch to fend for themselves in all sectors: education, health, law and order, justice, agriculture, industry, and all other concerns of ordinary people’s lives.

The federal government has carelessly led itself into a debt trap. Bureaucratic minds in Islamabad do not wish to understand their mandated constitutional role. An elite bureaucracy in connivance with “other” elites will run the economy aground. A similar case happened to the Soviet Union recently.

Let us also be reminded that the federal government has no role in central planning (with regard to economy). Centralised economic planning is not mentioned in the Constitution, which only mentions Provincial Economic Coordination under the National Economic Council (Article 156).

An economy based on agriculture and industry must de facto be a provincial subject (under the Constitution). However, Islamabad has “assumed for itself” a role of commanding government with regard to economy with vertical and centralised planning.

Let’s be clear. The federation is meant to work in a horizontal organogram. It is not a vertical sum of its total parts (provinces). It has been created only to collect unified taxes from all the provinces, regulate unified import and export of provincial industrial and agricultural goods, formulate unified foreign and defence policies and construct strategic highways. Although it has yet failed to construct a strategic highway between Karachi and Sukkur, catering to the country’s two major ports in Sindh.

At present, the federal government is demanding, through subterfuge and deceit, that the provinces’ share of 57.5 per cent under agreed NFC formula, be slashed which is protected under Article 160 of the Constitution. God forbid, if Islamabad’s demands are met, ordinary people will starve and their fundamental rights to education, health, livelihood, water, sanitation, environment, development will be eroded or snatched.

Lately, Islamabad has unleashed a media propaganda hinting that provinces are chipping away revenue. In reality, all revenues belong to the provinces. Even under the present seventh NFC, the provinces take less than 50 per cent of the total revenue as Islamabad charges one per cent for the tax collection, and the non-tax revenue collected by it is not part of the divisible pool.

Ask yourself, do civilised countries spend more than 50 per cent of their revenue on five supportive functions (tax-collection, defence, foreign affairs, import-export regulation and construction of strategic highways) whilst leaving out vital sectors of education, health, law and order, justice, industry and agriculture?

The predicament of Pakistan is that the federal government neither wants to understand it’s constitutional role nor does it want the people to understand it. The original governments of Pakistan are the provincial governments. Islamabad has and wants to continue to fund “parallel provincial governments” hidden and veiled behind its 34 ministries, 43 divisions and 400 plus corporations – mostly all making loss. This is neither its function under the Constitution nor its mandate.

Islamabad needs to drastically reduce its administrative expenses, non-combat defence expenditure and restructure its loans with international lending institutions in order to come out of its self-created debt trap. Islamabad must also do away with its annual Public Sector Development Program and transfer all such funds to the provinces respectively.