NFC Award to base on performance: Pasha

KARACHI: Dr Hafeez Pasha, former finance minister, has recommended to the government that the upcoming 9th National Finance Commission (NFC) Award should be linked with the performance of provinces, as they could not utilise the previous NFC on health and education properly.
He was addressing a seminar organised jointly by Karachi Chamber of Commerce and Industry (KCCI) and Institute of Policy Reforms (IPR) at a local hotel on Monday.
Pasha said Pakistan’s literacy rate, instead of increasing, declined by two percent to 58 percent last year. It fell by four percentage points in Sindh, which was shameful for the nation, he said. “Next award should be linked to the performance.”
He said that collection of taxes remained poor by the Federal Board of Revenue (FBR), as they had projected an increase of tax to GDP ratio to 15 percent in 2015 from 9 percent in 2010. But they failed. “The tax to GDP ratio is still at 10 percent,” he said.
Provinces were given Rs250 billion extra than their quota under the seventh NFC award, which will end on June 30, 2015. However, the provinces were not given Rs1,000 billion projected award by the then
NFC commission in 2010.
He said Sindh had also failed in other social indicators, but it did the best work in revenue collection and surpassed other provinces. “Delivery of basic services has virtually collapsed in this country,”he added.
Former finance minister said that after the 18th amendment, provinces received more funds for public sector development programmes, and they should spend their funds efficiently. They have a crucial role to play in agro based industry, as textile and other industry cannot grow until there is growth in the agriculture sector.
In reference to tax collection, Pasha said Sindh proved that by levying lower taxes, higher revenues could be collected. Sindh was charging the lowest GST in the country, at the rate of 14 percent against
17 percent implemented by the federal government.
Pasha said the federal government unnecessarily was engaged in encroachment of provincial taxes. The federal government was charging advance withholding tax on telephone calls, which was a provincial matter, he said. People are paying 35 percent taxes on phone calls.
Humayun Akhtar Khan, former commerce minister and chairman board of directors IPR, said the economy was stabilising, but private investment and exports continued to fall, which was alarming. Since, rupee was overvalued, it affected the exports. He named several countries that had devalued their currency to stabilise the growth and inflation numbers.
He said that government had continued borrowing from the commercial banks and warned if it was over five percent of the GDP, it would affect the borrowings of the private sector.
Talking about the energy sector, he said that power generation was not increased. “Major reforms are needed in this sector, but they are not visible.” Subsidy is being cut down in the power sector, which will increase the tariff rates, over burdening the consumers. Khan suggested that the five export oriented sectors, including textile, leather, and surgical items should again be zero tax rated.