LAHORE   -   The coming budgets of the federal as well as provincial governments will be based on the old NFC award as the fifth meeting held here in Lahore to finalise the 9th NFC remained inconclusive.

Country’s finance managers, led by Finance Minister Asad Umar, spent a whole day thrashing out the contentious issues, but failed to come up with an agreed formula on resource distribution.

Nonetheless, they agreed to meet again in a month time and finalise the 9th NFC award by December 31, 2019 as many more meetings may take place to reach an amicable agreement.

Even the deadline given for the finalisation of the 9th NFC at the end of Friday’s meeting is not final. “Efforts would be made to finalise the 9th National Finance Commission (NFC) Award by December 31, 2019,” said a press statement issued by the Finance Ministry quoting members of the commission.

Sources privy to the meeting said that issues relating to the collection and distribution of federal taxes, resource allocation for tribal areas and share of provinces in the federal divisible pool are yet to be settled. While the Centre wants to have an enhanced share out of the divisible pool, the provinces are not ready to compromise on their allocations as made in the last NFC Award singed in 2009.

Financial experts believe that one of the main reasons behind the disagreement over all these issues is the significant decline in collection of taxes in the last few years. It is a big question mark on the performance of Federal Board of Revenue (FBR) which continues to rely more on the indirect taxation instead of targeting new taxpayers, they said. Also, the financial obligations of the provinces have increased manifold after the passage of 18th Amendment but the federal government is disinclined to allocating more resources citing the revenue deficit.

The next meeting on 9th NFC to be held by the end of April 2019, will focus on FATA and the taxation aspects of ease-of-doing business, according to a press statement issued by the Finance Ministry.

The statement further said the six sub-groups, formulated during the first meeting in February, gave presentation on various aspects of resources distribution as per the terms of reference assigned to the groups.

The main focus of all sub-groups’ deliberations was transparency, harmonisation and sharing of data. The members of the Commission appreciated the work done by the six sub-groups in their first meetings, the statement said, adding it was agreed that the sub-groups would continue their deliberations and present their reports in the subsequent meetings.

On the occasion, the Chairman suggested that deliberations should also include incentives for poverty alleviation and social sector spending.               

The representative of government of Khyber Pakhtunkhwa proposed a framework for NFC deliberations aiming at equalising fiscal resources across federating units, equal access to public services for all citizens of Pakistan and expenditure efficiency at all levels of the federation.

All members agreed on the framework and lauded the efforts of the government of Khyber Pakhtunkhwa in this regard.

The Chairman emphasised the importance of a well-deliberated and consensus-based National Finance Commission Award and said all federating units shared a huge responsibility on this count. The Chairman reiterated that provincial governments would be engaged in the fiscal-related discussions with the International Monetary Fund.

He also suggested that each federating unit should nominate a focal person for data sharing to facilitate the working sub-groups.

He also stressed the need for strengthening NFC Secretariat and said necessary measures would be taken to improve its working. Technical members from Sindh and Khyber Pakhtunkhwa volunteered to submit a proposal in this regard, the press statement added.

 

Meanwhile, Asad Umar Friday said efforts were being made to complete the process of 9th NFC Award by December 31, 2019, besides improving coordination between the federal and provincial governments regarding collection of taxes.

Talking to the media after the meeting here at Punjab Civil Secretariat, he said the meeting reviewed the measures taken by six working groups, which were constituted during the last meeting on the subject. He said it was a good omen that Centre, Punjab, KP and Sindh had been assigned the coordination of one working group each, while Balochistan was tasked with coordination of two working groups. “The meeting also examined the demands, suggestions and recommendations of all five federating units and worked out further strategy and a line of action,” he said.

The federal finance minister further stated that he had witnessed a good spirit among all federating units during the deliberations to bring forth an improved NFC Award, ensuring a win-win situation for all.

He said right now a final date could not be given for announcement of the new NFC Award, and process for it would hopefully be completed by Dec 31.

“There are one or two matters upon which a principled stance is needed to be adopted. One of these matters is the development and betterment of FATA (Federally Administered Tribal Areas), after their merger with the KP,” he said and added there was a strong resolve of the nation to expedite the development process in these areas.

Asad Umar admitted that coordination among federal and provincial governments for tax collection had weakened for the last few years. "We want to strengthen the coordination on tax collection among the federal and provincial governments," he said.

Speaking on the occasion, Punjab Finance Minister Makhdoom Hashim Jawan Bakht said new NFC Award process was under way in very congenial manner, adding the 9th NFC Award would be equally beneficial for all federating units. He added there was a spirit of collective benefits among all the stakeholders.

KP Finance Minister Taimur Saleem Khan Jhagra said efforts would be made to bring about improvements in accordance with the suggestions and consultations of all provinces. He said entire country would contribute to development of FATA.

NFC Member (Sindh) Asad Saeed said there was a principled stance in the NFC meeting that new Award should be decided in a way that there should be no loss or extra benefit to any of the federating units. He hoped that further deliberations on the Award would continue in the same cooperative manner.

NFC Member (Balochistan) Mahfooz Ali Khan said a wave of terrorism had shifted from FATA to Balochistan, thereby raising the security expenditures of the province. He stressed the need for formulating a mechanism to bring Balochistan at par with other provinces.