Revenue distribution: Finalisation of new NFC award still distant dream

Centre terms provinces’ reports inconclusive

ISLAMABAD: Finalisation of the new National Finance Commission (NFC) Award appears a distant dream after the centre has termed provinces’ work on the matter ‘inconclusive’.

Finance Minister Ishaq Dar on Thursday held an internal meeting to review the work done by the provincial working groups before they begin negotiations by end of this month. The federal government was not very happy with the working of the provincial governments, according to finance ministry sources.

They said that reports compiled by provincial governments were inconclusive and lacked broader ownership. Dar was briefed on the progress of the four working groups, which were established in the first NFC meeting held on April 28, 2015, according to an official handout.



Dar was told that the draft reports of the four working groups on resource mobilisation, devolved versus integrated tax structure, allocation efficiency and expenditure analysis and rationalisation of subsidies and grants have been completed. The initial reports of the three groups, prepared by the provinces were discussed in a meeting on September 5 in Lahore.

The federal government prepared the fourth report on rationalisation of subsidies and grants that will be shared with the provinces this week.

The government also decided that the provinces’ reports will be shared with the federal government departments to get their feedback.

Dar emphasised that since initial work has been completed, it is time to expeditiously move to the next steps for completion of the award. He said all stakeholders need to focus on resource mobilisation and strengthening of relations between the federation and provinces to achieve national harmony and partnership on the path to development and progress.

He directed relevant federal ministries to complete inter-ministerial consultation on recommendations of the four working groups by the end of next week. The minister further ordered that the next NFC meeting be convened by end November.

In the current round of NFC negotiations, the federal government will seek an agreement to better balance devolution of revenue and expenditure responsibilities in a way that is consistent with macroeconomic stability.

Provinces’ views

The provinces have decided to write a letter to Prime Minister Nawaz Sharif to convene a meeting of NFC, said Senator Saleem Mandviwalla, the non-statutory NFC member of Sindh. He criticised the federal government for delaying the new NFC. “It seems that the federal government is not interested in new NFC. PM should intervene in the matter,” he said.

He said the centre should hand over the right to collect oil and gas royalties, and sales tax on goods to provinces. Sindh is of the view that the Federal Board of Revenue was not collecting sales tax on goods as per potential, causing losses to the provinces, he added.

“The provinces have already proven that they can better collect taxes. This is evident from the increase in sales tax on services collection,” he added.  Provinces are not aware of the collection of these royalties because the federal government is not giving any details of these royalties, he added.

Published in The Express Tribune, November 4^th, 2016.