Sindh Chief Minister Syed Murad Ali Shah on Monday called for revisiting the criteria of the National Finance Commission (NFC) award.
While chairing a preparatory meeting for the forthcoming NFC meeting, to be held in Islamabad on February 6, Shah said that the weight given to provinces’ population should be reduced while the quantum of revenue generation should be given a higher priority while determining the award.
The chief minister made the remark while preparing Sindh’s case in consultation with a team comprising members of the Sindh Revenue Board (SRB) and other finance, planning and development experts.
Murad complained that though wholesale and retail sales are ‘services’, the Federal Board of Revenue (FBR) collects ‘sales’ tax on them which leads to these taxes being grossly under-covered.
According to Murad, the SRB can do a better job collecting these taxes due to its close proximity to the tax base.
Shah further said that the collection of sales tax on goods should be assigned to the SRB to make the exercise more efficient.
“SRB can collect that tax on behalf of the FBR and retain a service charge,” the chief minister suggested.
“Similarly, the federal government collects Capital Gains Tax (CGT) on immovable property. The CGT is levied on the basis of the Income Tax Ordinance. In the spirit of the 18th Amendment, this tax should be devolved to the provinces,” he added.
Talking about Gas Infrastructure Development Cess (GIDC), the chief minister said that GIDC also needs to be transferred to the provinces as it is a provincial matter.
“The Sindh government should be given its due share from the amount collected by the federal government under the GIDC so far,” he said while adding that the excise duty on crude oil and natural gas — as per Article 161 of the Constitution — further needs to be devolved to the provinces.
Shah said that he would talk to the federal government and urge them that the excise duty on natural gas be enhanced.
“It was fixed in the 7th NFC award at Rs10 per million British thermal units (MMBtu) and it ought to be charged ad valorem,” he said.
Talking about royalty on crude oil or natural gas, Shah noted that the federal government collects royalties on these and and charges two percent of the receipts as a collection fee.
“From now on, provinces should be allowed to collect that tax themselves,” he demanded.
Speaking about his government’s stance on Octroi and Zila Tax (OZT), Shah argued that OZT is a consumption tax and Sindh’s share in it had been 46 per cent when it was administering it independently.
“But now the federal government has come along and convinced Sindh to stop collecting OZT in return for reimbursement from the federal government,” he said.
The chief minister further added that for this purpose, the federal government had enhanced the rate of sales tax from 12.5pc to 15pc, with the extra 2.5 per cent levy used to compensate the provinces.
Shah recalled that in 2010 the federal government had started transferring funds in lieu of OZT on the basis of the criteria which governs the NFC award. “This reduces Sindh’s share of the tax to 0.66pc.
Shah said that he plans to urge the federal government to enhance Sindh’s share of the OZT to at least 2pc.