Expanding the tax base in the country is more dependent on the provincial assemblies and provincial revenue collection departments than ever before. But the Federal Government will have to play an active role in lobbying the provinces to implement much needed reforms to make taxes commensurate to income, equitable and fair.
Judicious collection of taxes from agriculturists, retailers and other sectors has been a key focus of myriad budget proposals ranging from OICCI, Pakistan Business Council, ICAP and other representative bodies of stakeholders and experts alike.
But the pressure once building on the Federal Government appears to be waning and thinning out over the provinces. Federal Finance Minister Hafeez Sheikh was reported as having said "it is not the desire of the Federal Government to be involved in their (provincial governments) domains", when questioned over agri-income tax reform.
He was addressing media at the end of the Harmonised Strategy for Revenue Mobilisation Conference in Islamabad, which was called to boost coordination between the Centre and provinces over revenue generation.
The Ministers statement may be considered an honest admission of the post-devolution reality of government income and spending. However, it would be dangerous to consider Islamabad as aloof from the tax reform or lack thereof, at the provincial level.
Simply creating the requisite infrastructure is a task that remains unaccomplished across the provinces. The development of Sindh Revenue Board is touted as the most "well thought-out effort" according to its own publication on Sales Tax on Services.
But the assessment of the Sindh Economic Survey 2009-11 paints a bleaker picture stating; "shortfalls in service sales tax collections illustrate that a further transfer of responsibilities to the provincial level is not practicable." The survey was co-produced by the Institute of Business Administration and the Management Excellence Center.
If Sindh is struggling to meet key benchmarks in this process, some of the other provinces are not even in the running. This harsh assessment should provide context to the remarks of FBR Member Inland Revenue Shahid Hussain Asad, who recently stated that "better coordination between FBR and provincial revenue collecting agencies is in the best interest of all".
In essence, the Federal Governments responsibility has not ended at devolving some of its powers and responsibilities. It is crucial to regulate discourse with the provinces to ensure that national goals of revenue generation and equitable distribution of resources are not undermined.
Unfortunately, the Federal cabinet is too busy announcing "no new taxes" to prospective voters, to be able to turn to the provinces and call for accountable and fair taxation to supplement requisite social and developmental spending.
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