LAHORE: After the 18th Amendment, all ministries which should be under provincial control are still working under the federal government which is illegal.
Furthermore, even the Benazir Income Support Programme (BISP), which is working under the federal government, is now a provincial subject and it is illegal to allocate any funds to it in the federal budget, said distinguished economist Hafeez Pasha, while speaking at a pre-budget seminar organised by the Institute of Policy Reforms (IPR).
“Federal government is still managing the affairs of some six to seven ministries which should have been handed over to provincial control,” informed Pasha, adding that provinces could have generated significant revenues through these ministries.
Pasha, who is also the director of IPR, said despite a low share in revenue collection, high resource transfers have increased expenditure of provinces by one-third of the total public expenditure.
Provinces were fighting their own battles as they were unable to meet their ambitious development spending goals, and have instead built up large cash surpluses.
IPR recommended effective implementation of on-going development projects by adopting policies such as early completion of projects on which 75% expenditure has been made. Secondly, the IPR recommended, provinces should streamline procedures for approvals and releases, provinces may allocate a minimum of 15% of the development budget to power projects and prepare medium-term development framework.
Humayun Akhtar Khan, former commerce minister and chairman of the institute, referred to the two major developments that have increased importance of provincial governments.
The National Finance Commission of 2009-10 increased resource transfer to provinces, while the 18th Amendment enhanced their autonomy. He added that this autonomy also created concomitant accountability.
“Provinces should show greater ownership in enhancing revenues as well as demonstrate improved performance. IPR would also like to see provincial governments develop a strategic vision of growth and development,” he said.
Commensurate with increased resources, provinces needed to prioritise implementation capacity and strengthen institutions.
Pasha also stressed the need to enhance resource generation by provinces. Combined tax-to-GDP ratio of provinces is a paltry 0.7%. He recommended raising it to 1% in the next three years.
He proposed that provinces focus on agriculture income tax, urban immoveable property tax and provincial sales tax on services. These three areas have the capacity to generate revenue of around Rs200 billion for provinces, Pasha informed.
In Pasha’s view, revision of assessments based on price indexation could increase total collection without the need for significant administration input as well as without increased burden on the taxpayer.
As the federation has empowered provinces to play their due role in development and citizen welfare, it was up to the provinces to step up and meet their responsibilities by expanding and improving the quality of basic services like education, health, water supply and sanitation, he concluded.
Published in The Express Tribune, June 11th, 2014.