Provincial budgets 2012: Punjab focuses on job-creation

PML-N emphasises projects in southern Punjab; province to promote several employment scheme.

LAHORE: In a budget that combined populism and political pandering with the ruling PML-N’s traditional pro-business stance, the Punjab government announced a Rs654.7 billion budget which included such measures as interest-free loans for the unemployed to start their own businesses, taxes on luxury items, increases in civil servant salaries and 10,000 new jobs in the health and education sectors.

The Punjab government relies heavily on transfers from the federal government to finance its budget. During the fiscal year ending June 30, 2012, Punjab expects a transfer of Rs530.8 billion, which is more than 80% of the provincial budget.

Punjab Human Rights Minister Kamran Michael, who also holds the additional portfolio of finance ministry, said that the provincial government expects to collect Rs88.51 billion in taxes and expects another Rs35.65 billion in non-tax revenue (mainly income from provincial government properties and investments).

In addition, the Punjab government plans to launch a “Yellow Cab Scheme”, whereby the government will provide cars at subsidised rates to young men to seek self-employment as taxi drivers. The scheme appears to be identical to the one launched by the PML-N when it was in office at the federal level in the 1990s. That scheme suffered from massive incidents of fraud, where many people bought the subsidised cars for personal use rather than to be used to promote employment.

In what appears to be an attempt at promoting innovation in Punjab’s agriculture sector, Michael said that the provincial government will also be distributing land to graduates of veterinary and agricultural sciences programmes in the province, encouraging them to develop the land, presumably with modern agricultural techniques. It is unclear what criteria will be used to distribute land among the students.

He said that the government had allocated Rs52.8 billion for provincial law and order, a 6.2% rise over the previous year.

While the provincial governments are not constitutionally required to adopt measures that the federal government announces for its own budget, Punjab continued the convention of keeping provincial policies consistent with federal policy.

The provincial government announced a 15% increase in civil servant salaries and a 20% increase in pensions, in line with a similar move at the federal level. It also reduced sales taxes on services from 17% to 16%, similar to the federal move on the sales taxes it levies on goods.

“The Federal Board of Revenue (FBR) will collect GST and it is proposed that Punjab Revenue Authority should be established in the next fiscal year to collect taxes and revenues of the province,” Michael said, adding that in the coming year, the Punjab government plans to introduce a self assessment scheme for property tax.

The government will spend Rs23.3 billion on health and Rs34.90 billion on education in the development budget.

In an attempt to further its populist credentials, the government proposed to increase taxes on luxury items such as cars with engines above 1,000 cubic centimetres (cc).

In the past, such policies have resulted in a drop in revenue for the provincial government, say Punjab finance ministry officials, who point out that the province’s rich residents simply register their cars in Islamabad, where taxes on luxury items are lower.

Published in The Express Tribune, June 11^th, 2011.