Low revenue generation by provinces


AT a time when the Federal Government is making hectic
efforts for increasing revenue collection and some of the
measures taken for the purpose have started bearing fruit, the performance of the provinces in this regard is dismal as pointed out by the central bank. In its annual report, the State Bank of Pakistan has criticized provinces for low revenue generation, urging them to take measures for capacity building of provincial authorities concerned.
It is really dismaying that total provincial revenues grew two per cent in FY-2019 compared with 21% in the previous year. It has been observed that while the slowdown in the provinces own revenue collection in FY-2019 could be linked to overall weak growth momentum due to a variety of reasons, the performance of provincial governments in general has not been impressive since the introduction of the 18th Amendment. The Amendment has empowered the federating units to take measures for fiscal improvement but practically they are mainly relying on their share in the federal divisible pool and have not been able to mobilize their own resources. There is much room for enhancing revenue collection if, apart from capacity building of the tax machinery, transparency in tax collection is ensured and the element of corruption is eliminated. The provinces are mostly depending on very old bases like property taxes, stamp duties, motor vehicle levies, agriculture income tax, duties on utilities, professional tax, capital value tax and entertainment duty. The 18th Amendment added the services sector but the provinces have so far not succeeded in exploiting this avenue effectively. As for property taxes, stamp duties, motor vehicle levies and CVT are concerned, their rates have significantly been increased by this has not resulted in the desired increase in revenue collection due to corruption and leakages. It is generally believed that collectively revenue officials take more money home every evening than what goes to the provincial kitty. Measures towards automation have been introduced in some cases but these have not materialized into tangible benefits neither for the government nor for citizens because of the corrupt system. There is also much scope for increasing revenue if agricultural income tax is levied in a systematic and meaningful way.