The Sindh government on Friday contested the Gas Infrastructure Development Cess (GIDC), which the federal government levied once again in its budget just days ago amid widespread outcry from businesses and politicians.
Sindh Chief Minister Qaim Ali Shah made it a point to mention the cess in his budget speech as he said the issue has soured relations between provincial and federal governments.
“We demand that this cess is unconstitutional and should be immediately withdrawn,” he said, insisting that any tax should be collected after consulting provinces and the funds should be transferred to provinces as direct transfers.
The federal government collected Rs39 billion GIDC in fiscal 2013-14 and has set a target of Rs46.4 billion for 2014-15. The money raised through cess is to be spent on gas pipeline projects, which are vital for meeting Pakistan’s burgeoning energy needs.
On the other hand, the argument of the Sindh government is that it wants the money raised to bolster its own fiscal position, which will allow it to spend more on development.
The contention has popular support in the province as most of the country’s gas is now produced in Sindh.
“The subject of taxing a natural resource is a delicate issue and federal government has strongly urged to refrain from acting unilaterally in the matter and withdraw all the steps taken so far in the matter and start a consultative dialogue with provinces,” Shah said.
Manufacturers are protesting against the levy as it directly increases their cost of production. They also see the move as regressive especially as gas supply has worsened over the years.
Industry people say the tax is also a setback for petroleum exploration companies as it not only raises the price of wellhead gas for consumers but all the additional money goes to the government.
They argue that instead of cess a better price for the exploration firms could have encouraged search for new gas fields.
Published in The Express Tribune, June 14th, 2014.
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