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7pc of divisible pool proposed for NSF, special areas’ uplift

ISLAMABAD: The federal government on Monday formally proposed allocation of seven per cent of gross divisible pool taxes for the National Security Fund (NSF) and development of special areas — Fata, AJK and Gilgit-Baltistan — before distribution of the remaining proceeds between the Centre and the four provinces under the 9th National Finance Commission (NFC) award.

As a result, the Centre’s total share out of divisible pool taxes will practically increase to about 50pc from 42.5pc currently fixed under the 7th NFC award finalised with consensus in 2009 under the PPP government. Simply put, the Centre will have access to additional resources of about Rs250 billion.

The provincial representatives in the NFC — finance ministers of Punjab and Khyber Pakhtunkhwa and private members of Sindh and Balochistan — did not respond to the federal government’s proposal, saying they needed consultations with their chief ministers.

Finance Minister Ishaq Dar, who presided over a meeting of the NFC, told journalists that security challenges and future needs required 3pc of gross FDP for the NSF and its utilisation mechanism would be decided and implementation monitored by the Council of Common Interests. Secondly, he said a high-powered parliamentary committee led by Senator Sartaj Aziz had finalised a comprehensive report seeking 3pc of gross FDP for socioeconomic development of the tribal region for its ultimate status as a province or integration with KP.

During the presentation on NFC, Mr Dar said, the issue of additional funding requirements of Azad Jammu & Kashmir and Gilgit-Baltistan was also raised and, therefore, the requirements for the three regions — Fata, AJK and GB — increased to 4pc of gross FDP. “The proposal is to set aside 7pc of gross FDP before distribution of remaining resources” between the Centre and the four provinces, he added.

“A formal summary for inter se distribution of this 7pc will be circulated to the provinces in a few days along with breakdowns,” Mr Dar said, adding that the provincial representatives would come back to the next NFC meeting in the first week of January after consultations with their teams and the chief ministers so that the NFC could move on to the next stage of horizontal and vertical distribution of the remaining resources.

He explained that 57.5pc share for the provinces and 42.5pc for the Centre under the existing award were out of the net proceeds of the FDP, and not out of gross FDP. Similarly, he added, there was no international or constitutional bar on providing funds from national taxes to AJK, GB or Fata because these areas were already being funded by the federation and fresh allocations would be only “add-ons” to the existing expenditures.

Answering a question, Balochistan’s non-statutory member Dr Kaiser Bengali said the additional allocation out of gross divisible pool would cause a “de facto” reduction in provincial shares, but this would not be ‘de jure’ reduction because they would now get 57.5pc out of 92pc, instead of 99pc. He said one per cent of gross FDP was allocated to compensate KP for its war on terror losses.

Mr Dar said that even before the CCI huddle, a meeting of the National Security Committee had firmed up the proposal for allocation of 3pc of gross FDP for the NSF because the Centre had already created a Northern Security Division of 9,900 personnel. Another 28 divisions have been raised for security of the CPEC and 29 more were currently in the process of being raised, while 44 more divisions would be developed once these 57 divisions are fully functional and the Centre had already spent about Rs300bn for the purpose.

Sindh’s member Salim Mandviwalla said the province wanted to collect GST on goods because the provinces’ experience of collection of such tax on services had been very positive. He, however, explained that it did not mean that the provinces wanted to take over GST on goods or devolve it as this was a federal subject.

Punjab Finance Minister Dr Aysha Ghous Pasha rejected a perception that the provinces were not making efforts to increase their tax net and said Punjab had shown 45pc growth in taxes last year and 33pc in the first quarter of the current financial year.

courtesy : dawn news

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