Punjab in a tiff with Centre over revenue shares

Province forced to cut corners as a result of receiving lower tax collection revenue and debts

LAHORE: Owing to a decrease in tax revenue collection on part of the centre, the Punjab government is undergoing critical financial strain. As of now, Punjab has been given a lower share of the revenue, while a large amount is also collectable in the form of outstanding dues.

To tackle the situation, the provincial government has been compelled to cut down on its current financial budget while also complying with the conditions laid out by the International Monetary Fund (IMF) and report surplus budget to avoid any deficit. Subsequently, Punjab is left with no option but to significantly reduce its non-essential expenditures and halt the work on several developmental projects.

During the first seven months of the current fiscal year, the Punjab government has reported Rs173 billion in outstanding receivables for the collection request made to the centre.

From the total, Rs45.5 billion represents lower collection on account of provincial taxes for the current year, while the remaining Rs120 billion represents outstanding payments to be made to Punjab.



The provincial government has been repeatedly calling on the centre to release the outstanding amount but the latter has been unresponsive because of its own financial constraints.

According to the provincial finance department, Punjab has to collect the outstanding amount as well as Rs48 billion on account of net hydel profit but despite demands, the federal government has not been able to clear the dues for years owing to a shortage of funds.

Akin to that, there is an issue of tax adjustment amounting Rs20 billion between the Punjab Revenue Authority (PRA) and the Federal Board of Revenue (FBR) which has not been resolved. Meanwhile, the National Bank had deposited Rs5 billion to the FBR instead of the Punjab Revenue Authority.

There have been several discussions between the centre and Punjab over the issue of refunding the money but the FBR has, so far, done nothing about it.

The Punjab government has also demanded the centre to release Rs10 billion incurred by it on account of wheat export subsidy. According to the provincial government, the centre had directed the provincial food department to pay for the subsidies on behalf of the federal government but the amount has not been reimbursed.



The federal government also owes Rs5.03 billion paid by Punjab for expenditures related to metro bus services for Rawalpindi and Islamabad. Similarly, the provincial government also paid Rs13.79 billion on behalf of the centre on account of the Lady Health Workers Programme and Rs4.61 billion for the Workers Welfare Board, the reimbursement of which is still pending.

Chief Minister Punjab Sardar Usman Buzdar has also requested the prime minister to settle the outstanding amount to help Punjab address its financial difficulties. In the current fiscal year, the centre was supposed to apportion Rs730 billion for Punjab from the federal tax collection between June 2019 and January 2020. From the total, however, only Rs684.5 billion has been received by Punjab.

According to Punjab’s finance department, the chances of adequate provision of resources for the province are getting bleak given the troubled economic situation and the ongoing coronavirus scare. CM Buzdar has reportedly contacted the prime minister twice with regards to the collection of the outstanding dues.

Published in The Express Tribune, March 21^st, 2020.