Expecting too much

THE provinces have become the favourite punching bag of Islamabad, donors and commentators. They are being chastised for failing to generate adequate resources to fund their constitutional responsibilities and provide social and economic services, such as law and order, education, health, water and sanitation, etc. This article examines the fairness of this censure, without getting into the merits of the last NFC Award that has given the provinces close to 60 per cent of the national divisible resource pool. The revenue-raising capacity of the provinces is somewhat limited because of the taxation powers in the Constitution and the structure of GST in VAT mode. This is not to suggest that the provinces have done enough to generate revenue. Historically, they haven’t been sufficiently aggressive in collecting taxes on incomes derived from agriculture (AIT) — making it worse by also treating land rented out as agricultural income — or to make urban property tax more progressive and robust. However, they have made a decent effort in recent years to mobilise additional revenues by widening their base of GST on services. As for AIT, there are outlandish claims about what can be generated from the crop sector as well as exaggerated estimates of the size of the livestock sector.