Govt urged to allow provinces collect indirect taxes

KARACHI: Kaiser Bengali, representing Balochistan in National Finance Commission (NFC), urged the government on Wednesday to delegate provinces with power to collect indirect taxes.

“Indirect taxes should be collected by the provinces and for this purpose the constitutional changes would be required,” Bengali said, addressing a launching ceremony of a study titled, ‘Federal Fiscalism in Pakistan: Emerging Issues’.

Social Policy and Development Centre (SPDC) hosted the event.

The senior economist said government should increase provincial share in the new NFC award. He said major changes were introduced in the 7th NFC award of 2009.

Bengali said the federal government had smartly played by making customs duty part of the divisible pool as it knew the duty collection would decline with the certain international obligations and which would subsequently cut the share of provinces.

Muhammad Sabir, research analyst of SPDC said the authority given to the provinces to collect income tax was compromised in the past.

“To increase the base of federal divisible pool the collection of entire direct taxes, including agriculture income tax should be entrusted with the federal government and other indirect taxes, including sales tax and excise should be collected by provinces,” Sabir said. “Intergovernmental fiscal transfers should be revisited.”

The analyst said India established first finance commission in 1951 and since then the country has been regularly announcing the awards for distribution of resources among the states.