Punjab government is a lot like its federal cousin: it missed various FY15 budget targets, which were unrealistic from the start. Now the FY16 targets are even aggressive despite a female finance minister taking charge. No doubt an economist is better suited for the position – Dr Aisha Pasha is not only an eminent economist herself but also the spouse of one of Pakistan’s best fiscal experts.
Punjab’s total revenue receipts missed the budgeted target by 7 percent to stand at Rs962 billion in FY15. The lion’s share is that of the federal transfers and straight transfers, which are linked to federal government’s tax revenues. Since the actual number for the latter is estimated at 93 percent of budgeted amount, Punjab share is proportionally lowered.
Then the Punjab government’s own tax revenues have come up 30 percent shy of the budgeted number. The biggest province was envisaging 70 percent growth in its tax revenues to reach Rs165 billion in FY15, but actual growth was restricted to 19 percent, thus yielding Rs114 billion.
The potential tax collections are huge as there are numerous services on which Punjab Revenue Authority (PRA) can collect GST. Besides, there are huge gaps in areas like property tax, capital value tax, land revenues and agriculture income. Seeing these gaps, the PRA is looking for a 41 percent growth to raise Rs161 billion as tax revenues in FY16.
On GST, the provincial government collected mere Rs46 billion (7% growth over FY14), which is half of what was budgeted (Rs95bn). Is PRA able to grab sales tax from restaurants and coffee shops in every nook and corner of elite areas? Does your barber or beautician cut GST on your bill? Do you get a receipt from doctor’s visit? Same goes for lawyers, architects and the list goes on.
The government expects 56 percent growth in GST to reach Rs72 billion in FY16. It is expecting 10 new services added in the tax net to yield some revenues. Rewards have been reserved for whistle blowers.
We have been hearing about taxing agriculture income for decades but what the provincial governments get is peanuts. Punjab raised just Rs1 billion on this account in FY15. What about capital value tax – should it be more on movable or immovable properties?
Let’s it put in a different way: an average household spends more on cars or land/house purchases? The tax collection data suggest that transaction values on movable are much more than immovable – Rs4.5 billion collected on former while latter is yielding not even a billion rupee.
The targets for FY16 are focusing on movable property, whose collection is budgeted to almost double while immovable remains below a billion mark. Why can’t the government correct the issues pertaining to declared value of land, for that value is usually a fraction of actual sale value?
Just like the federal government, onus of revenues fell on non-tax revenues for Punjab. The government raised Rs101 billion as against the budgeted Rs64 billion in the outgoing year; and its major chunk came from non-development grants from federation. Since the federal government expects its non-tax revenues to fall from revised estimates of FY15, the Punjab government expects the same – (FY16B: Rs95bn).
That is the story of revenues which primarily lies on federal divisible pool and straight transfers while one-fourth of revenues are to be raised by the province itself. The provinces have been spending centers and Punjab is no exception. Punjab expects its current revenue expenditures to increase by 10 percent to reach Rs753 billion and current capital expenditure is budgeted at Rs294 billion (up by 21% from FY15 revised estimates).
The talk of the town is the annual development plan (ADP), which is estimated at Rs400 billion – a 37 percent increase from revised FY15 estimates. The government budgeted Rs345 billion in FY15 but missed by 15 percent or Rs55 billion.
The lesser the revenues are (both from federal transfers and provincial revenues), lower will be the development spending. The equation is simple: if you expect FBR and PRA to meet their optimistic targets in FY16, the development spending would be on the dot. But history suggests that the hardest task in the country is to collect taxes and virtually every year authorities shy away from the effort, thus missing the targets.
Within the ADP, it’s a no-brainer to find what the focus of Shahbaz Sharif’s province is. Yes, it’s roads, bridges and mass transit systems. About Rs161 billion (40% of the ADP) is earmarked for infrastructure development. Another Rs28 billion is allocated on transportation for Multan’s metro bus and Lahore’s orange line. For more on this, read the adjacent story on infrastructure concentration in Punjab’s ADP.
The spending on education development is one-third of what is budgeted to be spent on infrastructure (Rs56bn) with prime focus on secondary education. The plan is to increase literacy to 100 percent in medium term and that is why education development expenditure is expected to reach Rs100 billion by FY18. It seems to be in the priority list but not the immediate priority as the doer is busier in building roads and highways, first!
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PUNJAB BUDGET AT A GLANCE
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Budget Revised est Chg in
Rs (bn) est. 2015-16 2014-15 FY16
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Revenue
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Total provincial receipts 1447.2 1214.5 19%
Capital receipts 302.7 252.7 20%
Federal transfers 888.5 746.0 19%
Provincial tax revenue 160.6 114.2 41%
Provincial non-tax revenue 95.5 101.5 -6%
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Expenditure
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Total provincial expense 1447.2 1214.5 19%
Current revenue expense 753.0 683.2 10%
Current capital expense 294.2 241.0 22%
Gross development expense 400.0 290.4 38%
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Data source: Budget documents, Finance department, Government of Punjab
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