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June 11, 2019

Punjab fails to achieve tax collection targets

Lahore

June 11, 2019

LAHORE: The Punjab government has failed to achieve its provincial tax collection targets by around Rs101 billion besides receiving Rs125 billion less from divisible pool; still its budget estimates for year 2019-20 of Rs2.161 trillion are 18.75 percent higher than last year.

According to document available with The News, the total general revenue receipts for next fiscal are estimated to be Rs1.832 trillion against the receipts of Rs1.421 trillion in the revised budget estimates of 2018-19. This is a sharp increase of 31.1 percent in general revenue receipts in the next fiscal. This time around the provincial government seems to have lowered its expectation of receiving its share according to the actual federal tax revenues of Rs5.5 trillion.

The estimates have been prepared on tax revenue collection of Rs5.2 trillion by the federal government. The Punjab government expects its share in divisible pool to increase from Rs1,156.8 billion in 2018-19 to Rs1,494.5 billion in 2019-20.

The increase in its share from the federal divisible pool would be Rs337.7 billion –the highest ever in Pakistan’s history. If the federal government succeeded in achieving its tax revenue target then the Punjab government would get additional over Rs150 billion from the federal divisible pool based on its share of 52 percent from the amount earmarked for the four provinces.

It is interesting to note that the possibility of getting such a huge amount from the centre has made the provincial economic planners complacent as the provincial receipts are lower than the original provincial revenue receipts of Rs375 billion (revised target Rs264 billion). The target of 2019-20 is estimated at Rs368 billion. This is in sharp contrast to the behaviour of the federal government that also missed the revenue target by large margin but is gearing up its tax machinery to increase the tax revenue by almost Rs1,500 billion. The provincial government is unlikely to bring doctors and many other professions into the services tax net. In fact, the Punjab government has made additional provision of Rs16 billion in 2019-20 for the doctors’ package. Around Rs3 billion have been reserved for South Punjab secretariat. It intends to increase salaries and pensions by 10 percent and even then post a surplus of Rs155 billion in the next budget.

The provincial government also announced surplus of Rs150 billion in 2018-19 but since the federal receipts declined by over Rs125 billion and the provincial revenue collection was also over Rs100 billion short so the surplus would not be there.

The provinces are in the driving seat as far as the revenue collection is concerned as they fulfil almost 90 percent of their budgetary needs from the federal divisible pool. But this trend is dangerous as the new revenue collection potential is now in provinces that are entitled to collect the services tax that account for almost 60 percent of our GDP while the tax collection from services is less than half the tax collected from the manufacturing sector that is only 18 percent of our GDP.

It is high time that provinces rise to the occasion as revenues are badly needed for development. If the share of the provinces collected the taxes from numerous exempted services to their actual potential they could more than double the development work in their regions.

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