Provinces to get amnesty revenue under NFC Award

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ISLAMABAD – Tax amnesty scheme will benefit all the provinces equally, as the federal government will distribute the amount generated from the scheme among four provinces under National Finance Commission (NFC) Award.

“The amount generated from tax amnesty scheme is coming under the head of income tax, as it is provided under Income Tax Ordinance 2002. Therefore, it will be distributed among the provinces and federal government under the divisible pool,” said an official of the Ministry of Finance.

The amount generated from ongoing tax amnesty scheme would be distributed among federal government and provinces under the 7th NFC Award. As per 7th NFC Award, the federal government would retain 42.5 percent and would have to transfer 57.5 percent resources to all the four provinces from the federal divisible pool. As per the current award, Punjab is allotted 51.74 percent share, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62 percent and Baluchistan 9.09pc.

The Federal Board of Revenue (FBR) has so far generated Rs97 billion through the tax amnesty scheme out of which around Rs36 billion have been collected on foreign assets and Rs61 billion on domestic assets. The government is expecting to generate additional Rs60 to Rs80 billion in remaining twenty days of the scheme, as people are taking interest to declare their hidden assets by paying nominal tax.  The tax amnesty scheme has given good response so far, as 55,225 declarations have been filed in which declared value of foreign assets is around Rs. 577 billion and that of domestic assets is around Rs.1, 192 billion. In addition, $ 40 million has been repatriated. The scheme would expire by end of July.

Despite tax amnesty scheme, the federal government would slash the provinces share under NFC award due to FBR’s inability to meet its revised tax collection target during previous fiscal year. The FBR has collected Rs3841 billion during previous fiscal year. It has missed the revised tax collection target by Rs94 billion. Therefore, the provinces would reduce lesser.  It would be second time in a single year when federal government would reduce the provinces share under divisible pool due to poor revenue collection.

Earlier, in April this year, the federal government had cut the provinces share under NFC Award by Rs68.2 billion due to FBR’s inability to meet tax collection target. The federal govt had downward revised the amount to be transferred to Rs2316.1b to the four provinces under NFC award during FY2018 as against the budgeted amount of Rs2384.2b. The centre has downward revised the amount, as FBR could not achieve its annual tax collection target. The FBR would collect Rs3935b during FY2018 as against the target of Rs4013b.

The break-up of revised Rs2316 billion showed that provinces would receive Rs2230 billion under divisible pool and Rs85.99 billion as straight transfers.

The share of Punjab province has reduced to Rs1138.4 billion from Rs1161.8 billion registering decline of Rs23.4 billion. The Sindh province share has also decreased to Rs584.3 billion from Rs612.6 billion showing reduction of Rs28.3 billion. Meanwhile, the Khyber Pakhtunkhawa province’s share has down by Rs8.85 billion to Rs381 billion from budget estimates of Rs389.9 billion. The Khyber Pakhtunkhawa got one percent additional due to the war on terror.

The federal government would transfer Rs212.32 billon to Balochistan during fiscal year as compared to initial budget projection of Rs220 billion.

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