Under the current or 7th NFC Award, some of the governments expenditures have been devolved and provinces now receive some portion of federal revenues for administrative purposes. This revenue transfer leaves little room for the payment of major expenditures like defence and debt servicing which remain under the Federal government.
With the Federal government still trying to balance cash inflows and outflows, support from the provincial and local levels in this regard seems important.
One way to lessen the federal burden is to emphasise the need for revenue generation from within the local governments. Tax collection needs to be done not only at the federal level but also at the provincial and local levels.
Taxes collected and spent at the provincial level will help reduce pressure on the federal government to arrange cash for administrative purposes and the savings at the federal end can be used to pay off the ever-increasing debt of $55 billion.
According to Ishrat Hussain, if tax responsibility was given to the local government, 1 percent of GDP could be collected from property valuation in Karachi alone.
In addition to better debt financing, tax collection at the local level creates a sense of ownership and responsibility over revenues, resulting in efficient utilisation of resources.
Experience shows that certain governmental responsibilities, including tax collection are more effectively undertaken at the local council level.
People are more responsive to tax payment when decisions are taken in their own neighbourhoods. If taxes are collected at the local level, better allocation and accountability can be ensured.
However, if total empowerment is passed on to local authorities, issues of corruption and restricted spending can arise.
To avoid such situations, bureaucratic watchdogs must be present. The role of the bureaucracy under the local government is to carry out its functions efficiently and oversee the working of the government.
The local government has a major advantage over other levels of government: it has a better understanding of the needs of the people and is better equipped to fulfil those needs. It is important to exploit this to the advantage of the masses by giving authority to the local government to spend on the relevant agendas.
This knowledge can also ensure minimum wastage of resources as the local authorities can draw attention to the issues that need to be addressed.
For example, by highlighting that the level of awareness of washing hands is 99 percent in Islamabad and only 5 percent in Rajanpur, the local government can help channel the resources to educating the masses in Rajanpur instead of building hospitals to improve health conditions.
Empowering the local government with greater autonomy over budget making and expenditures will help those living in the far-flung underdeveloped areas improve their standard of living.
It is, therefore, essential that politicians forget personal gains to maintain authority over these subjects and take efficient steps for the betterment of the people and the economy.