Federal government has not been able to get a firm commitment from provinces to give 0.7 percent budget surplus to contain the fiscal deficit of 5.5 percent for the current fiscal year. Sources said the issue was discussed here on Friday in a meeting between federal and provincial finance secretaries and the provincial finance secretaries have reportedly refused to commit how much they would give as budget surplus by the end of fiscal year.
However, provinces have agreed to make every possible effort in this regard. About Reformed General Sales Tax (RGST), a provincial finance secretary told Business Recorder that the decision for implementation the RGST would be taken at political level. However, he said there was unanimity on the issue of broadening tax base.
The meeting agreed to effectively tax the agriculture, real estate income and a strategy to this effect would be devised by the provincial finance secretaries in the next meeting. The provinces have been reportedly asked to come up with their ideas how to effectively operationalise the existing agriculture specific legislation to enhance tax collection.
He said federal RGST law would be given final touches and provincial laws would be finalised in light of the federal legislation for making federal and provincial RGST legislations uniform. He said the sales tax rate under RGST may be reduced from earlier proposed 15 percent to between 10 to 12 percent in the new laws for its acceptability.
The meeting was of the view that the new taxation measures and documentation of the economy are critical for stabilisation of the economy and to create fiscal space for investment in social sectors. The provinces, he said, had the fiscal space after the latest National Finance Commission Award and approval of 18th Constitutional Amendment to increase development.
But the provinces even withheld some urgently needed measures as giving their annual budgets surplus to contain the fiscal deficit, he added. He said this was agreed in the NFC that provinces would contribute for maintaining the fiscal discipline by increasing their tax-to-GDP share. On the issue of withdrawal of subsidy on agriculture, he said except Balochistan all the three provinces have agreed to withdraw subsidy on agriculture tube-wells as it was not targeted and was being enjoyed by the rich as well.