Some people are still criticising the 7th National Finance Commission Award even though many have already shown that their criticisms are not valid. They are using their imagination to create new arguments.
Their new argument is that the provinces were warned that the 7th NFC Award would only work if the country could increase its tax revenue by 3% of its GDP within three years. They said it was clear from the start that without this extra tax money the award would not work. They also hoped to introduce a new tax on goods and services and wanted the award to help spread financial responsibilities to the provinces which would support local governments.
However I was part of the 7th NFC, and we all agreed on the award after many meetings. The truth is that none of these claims are correct. The former federal finance minister did aim to increase the tax revenue to 15% of GDP but there was never any discussion that the award would fail without extra tax revenue. Nor was there any expectation set about setting up new local governments.
It’s also important to note that provinces don’t collect much tax compared to the federal government because most large tax sources are controlled by the federal government. If provinces had access to these large tax sources, they might collect as much tax as the federal government now does.
Some people are suggesting that the Federal Board of Revenue (FBR) should get 2% of the total tax revenue before it is shared with the provinces. This idea does not make much sense just like the previous ones.
There is also a growing idea that provinces should collect all the taxes and then give a portion to the federal government since all tax sources are actually in the provinces. The province of Sindh has even officially suggested this.
Criticising the provinces for not collecting enough taxes is becoming outdated especially since the provinces have started collecting more sales tax on services than before.
It’s time for those who want more federal control to stop trying to take resources from the provinces or the poor. Instead they should focus on reducing unnecessary spending such as on non-combat defence to help fix the economy. The leaders who want more central control need to be brave and take responsibility for making these changes.
