End the NFC the so-called bauchon-ki-pocket-money

Society Pakistan & World Affairs
1

One wonders when this archaic system of taking money and handing money will end.

Right now provinces are behaving as little kids fighting over the amount of pocket-money from daddy-ji the federal government.

This is not only inefficient, it is demeaning and disrespecting to the provinces.

Federal government should simply collect income tax and a bit of sales tax to run the federal institutions like federal courts, army, and our baboo sahiban. Federal government may contribute to mega projects like motorways, school/college construction, power-projects etc. Feel free to add few more in their but that’s all.

All other taxes should be collected by the provinces for “provincial use”. So they can raise or lower the taxes based on their needs. They may put provincial-income tax, provincial-sales tax etc.

Then the districts should be allowed to collect “and keep” taxes for their day to day use.

This is what the real autonomy is.

The current NFC system is keeping us chained to few $billion per province. But our real economic activity can generate much much higher incomes.

Punjab has 80 million people, the same as France’s population.

France’s 80 million people earn/spend $1200 billion per year. It is a pity that Punjab’s provincial government is being run using $3 billion. Punjab should be generating and then spending at least 200 times the current amount.

Karachi has a potential of earning/spending at least $30 billion a year. Right now the city is being run using pennies compared to that amount.

Afsos that the whole Pakistan earns/spends $20 billion of its “own money”. The rest comes from foreign income/loans/grants. Pathetic isn’t it.

Thus the NFC is keeping us chained to old ideas, and very very limited income.

The day NFC is done away with, we will figure out better ways to make money at “local level” be it the province, or the district.

Then only then we as a nation will realize our full potential.

However this topic has to be approached with sincerity, and whole-heartedness.

If we use mutual hatred to approach this sensitive topic, then our financial system will never improve.

=================

Population not to be only criterion for NFC award: Tarin

By Mubarak Zeb Khan

Thursday, 20 Aug, 2009 | 05:00 AM PST |

ISLAMABAD: Finance Minister Shaukat Tarin said on Wednesday that the National Finance Commission would consider some other parameters, in addition to population, for distribution of resources among provinces in the next NFC award.

Talking to newsmen after addressing the Balochistan Economic Development Forum, he said the award would be finalised within a month of the first NFC meeting, to be held on Aug 27 and 28.

He said the federal government would provide funds from its share to small provinces to overcome their financial problems.

In reply to a question, the minister said the government would provide Rs50 billion to Balochistan during the current financial year, in addition to Rs6 billion per month.

He said the people of Balochistan would get share of profit from exploration of natural resources and expressed the government’s determination to support urgent needs of the province. He enumerated a number of steps being taken to redress decades of neglect.

Mr Tarin recalled the government’s decision to write off a Rs17 billion overdraft of Balochistan last year and a new focus on resource distribution in the next NFC award beyond the population-only criteria.

The profit-sharing with the local government shall create ownership for mining and oil and gas projects, he said.

Mr Tarin said the United States had not reimbursed the committed $1.4 billion Pakistan had spent on account of the war on terror, creating a serious balance of payments problem.

‘The US is supposed to pay the amount Pakistan has already spent from its kitty to sustain operation to combat militants in tribal and settled areas of the country under the coalition support fund.’

The minister said Pakistan would receive $500-$600 million within six months as compensation for providing logistics support to the US in its war in Afghanistan.

He said Pakistan was also seeking about $1.5 billion during the current fiscal year under the coalition support fund.

DAWN.COM | Pakistan | Population not to be only criterion for NFC award: Tarin

2

Re: End the NFC the so-called bauchon-ki-pocket-money

an accurate point ..more in line with what many Baloch and Bengalis originally wanted with regard to pakistans federal taxation system. What you are proposing is a defined criteria of federal taxes, provincial taxes and local taxes, as well as provincial tax collecting authorities. Right now almost 88% of tax collected is done by the FBR and 10% by the provinces 2% by LG's.

The thing is in other federal systems the **NFC equivalents **the money collected from federal taxes is also distributed by multiple criterion like what the provinces are asking. That is the essence of a federal system that all provinces are equal irrespective of population.

By Seeing Lahore Weather
3

Thank you.

I don't think BDeshis ever changed their tax collection structure by making it more local compared to Indian or Pak. They are no more decentralized than other countries in the region.

Balochis too are not sincere, otherwise they would have already tried to decentralize the state level taxes.

The problem is that many of the proponents of "autonomy" want everything for themselves and generally they are not for "true" decentralization.

A true decentralization utilmately results in large scale "entrepreneurship", which is badly absent from Balochistan.

Which "other federal systems" are you referring too?

4

Canadian and Indian to name two...

5

And what are the specific clauses (source really appreciated) from Indian equivalent of Pak-NFC is really good that we should adopt it as well?

6

there are a variety of models the Australian, the Indian, the German ..each model has their own benefits as well as failures. You can google all the sources and information you need under keywords like "fiscal federalism" in combination with "Pakistan" or if you'd like to read about other models ..the Indian Finance Commission or australian Commonwealth Grants Commission.

VO MUJHSE BICHRA TO………….
7

Here is the NFC award structure for Pak.

Punjab
population= 95 million (spends $6 billion)

Sindh
population = 39 million (spends $4 billion)

NWFP
population = 27 million (spends $2.7 billion)

Balochistan
Population = 9 million (spends $1 billion).

Total provincial expenditure per year = $14 billion

Pakistan's total federal budget = $30 billion (that means $16 billion to take care of loan/interest payments, imports, military, federal expenses on government, medical, pensions etc.).

What do you think is the equitable distribution of funds to replace the above figures in light of Indian / Australian / Canadian system.

Make sure you keep in $ billion.

Thank you.

pyar ,Ishq Or Muhabbat
pyar ,Ishq Or Muhabbat
8

I think you need to read up on the issues i mentioned ..

using those figures you've mentioned is also a waste of time because of how the taxation system works.

The provincial budget figures you cite aren't accurate because for example NWFP and Balochistan budgets are projected on the basis of federal transfers. Those transfers rarely happen on time and the provinces then borrow from the federal govt again to manage their balance of payments. the provinces also have little say in influencing Federal governments development projects. I've posted about this before ..again you can search for the figures used..

9

I'll.

However you ought to discuss how Indian system is better.

BTW India's last known budget is $202 billion and their population is 1.16 billion.

So let's have a discussion to show if Indian model is worth looking at.

Yes. That's pain in the ?/???? Isn't it?

Government baboos all over the world work so fast at almost snail's pace.

Have you ever worked in government contracting office in Pak and outside Pak?. And see how slowly the bill moves even when there is no bribe involved?

10

so the solution is as you said..revenues for royalty and tax should be paid directly to the province and district in question..the less layers of red tape the better it wil be for people.

right now as per an old article "* in the case of Balochistan, the total debt (even without accounting for the massive liabilities for employees provident fund payments,
accrued gratuity entitlement and the pension liability built up over the years) is 2.5 times total revenues (including transfers under the NFC Award)
while annual interest payments absorbs
16 per cent of the total annual revenues.
The corresponding figures for the NWFP are two and a half times and 28 per cent
respectively.*

11

Well that should work as long provinces make sure that their citizens pay their federal taxes directly to the federal government.

  1. That means each citizen above certain level of income pays upto 40% of their income straight to the federal government. Then perhaps 10% goes to the provinces and a smaller percent goes to the district.

The idea is that provinces and feds must work together in harmony and "mutual partnership". Our atmosphere of bickering and threats to the federal government are not right either.

  1. However taxes and royalty is not enough. Provincial leadership should constantly lobby Feds to launch mega projects like road-building, big powerhouses, big ports, and large military cantonments. This is the only way to bring more jobs, improve infrastructure, and make the economy healthy.
12

1) That's an option..again as I said there is no perfect model but what's important is the key principles a commission aspires too..Till a few years ago the gap was 65% Federal gov 35% provinces with the provinces losing another 5% as payment to the CBR. It was during Musharrafs time that the figures mentioned earlier applied.

2) That can only happen if the senate has greater power. If you give greater oversight powers and finance bill powers to the senate ..the federal govt would have to concede to lobbying by areas with small populations whether gilgit or balochistan.

All the present NFC debate in the news doesn't even include how the federal development budget is spent..

India Bollywood's Plagiarism of Pakistani Music
13

Re: End the NFC the so-called bauchon-ki-pocket-money

Jub rotian kum hon or khane wale ziyada hon to larai to ho gi. There is no good solution suitable to all ppl unless we have proper distribution of resources .
Gap b/w poor n rich is increasing coz poor is giving his due share of taxes for nothing while the rich is not contributing as per his income while getting the most benifit

14

Very valid point Zakk..

Musharraf spent most of the Federal Development Fund in Karachi for nine years, making Mustafa Kamal a hero...

Today Zardari is trying to spend this fund in Sindh and out of total 256 billion rupees projects announced today by the feds 128 billion is being spent on only Karachi Mass Transit and less than 10 billion are being spent in Punjab with 56 percent population on some petty small dam projects...

Tomorrow Nawaz Sharif will spend everything in Punjab making others feel really bad !!!

This system increases bad feelings amongst the provinces. There has to be system where resources are more justly distributed taking in to consideration that every Pakistani is equal no matter where he lives in the country...and resources are distributed equally and justly so that no citizen becomes a lesser citizen as far as development spendings are concerned !!!

15

Good thread - constructive discussion, a welcome change from the usu. provincial bickering amongst guppies

Burqaposhx, Zakk and Yazdi - I am impressed with your knowledge

Have to be honest here - did not know much about NFC and how it works before.

Why don't you guys raise these valid points in a national newspaper - Dawn, News, Daily Times, Nation - and/or address them to Shaukat Tareen as well?

16

A fair point moonstar..you need to look at distribution of resources as a cake which needs to be cut both horizontally and vertically. Horizontal cuts are those made between Federal gov and provinces +/- FATA, AJK and Gilgit-Baltistan. Vertical cuts are what taxes are collected by whom..

you can't stop abuse of power and you can't guarantee everyone gets what they need..but that should not stop us trying.

17

Yes.

The idea is for the provinces to quit fighting on dried up bones aka NFC, and come to the table with concrete measure for overhauling tax structure. Then only then we'll be get rid of the shackles of poverty.

The more infighting we do, the less likely it is to improve our financial future.

18

It can be true in the reverse as well.

Jub larai ho gi, to rotian kum ho jaanain gi.

Why do we the "so called" Muslim nation tend to forget the basic tenant of Islam that says "Thank Allah for what you have (Qanaa-at and Shukr and sabr)" and then work your tail off to earn more from Allah's universe?

If we don't do Shukr supplemented by handwork and instead start fighting with each other, then Allah will take away even what little we have.

However if we love each other, and do 24 hour sabar and shukr and work hard, then Allah will give us more.

Let's all make sure that Shukr and Dua about Pakistan is our first and the main emphasis whenever we look for betterment.