News
Monday, May 17, 2010
Political issues delaying budget finalisation* Govt needs political decisions on VAT collection, implementation of Pay and Pension Commission’s proposals, transfer of powers to provinces
* Pay reforms commission wants Rs 105bn allocated for reforms, economic managers want Rs 45bn allocationBy Sajid Chaudhry
ISLAMABAD: The Finance Ministry is in a fix on how to complete the Budget Strategy Paper-2 (federal budget), as three major issues still need political brainstorming and unanimity of views of the federating units, official sources informed Daily Times on Sunday.
Ministry of Finance sources are concerned over the delay in the decision on the transfer of functions to provinces after the abolition of the Concurrent List by the 18th Amendment and decision on the acceptance of the recommendations by the Pay and Pension Commission.
The third contentious issue remains the resolution of dispute between the Centre and Sindh province over value-added tax on services.
The Budget Strategy Paper-2 that will provide the final estimates of the federal budget 2010-11, needs to be completed at the earliest in order that the budget 2010-11 can be announced on June 5, the third revised date for the purpose.
The decision on transfer of functions (around 24 ministries) to provinces after the abolition of the concurrent list through the 18th Amendment has serious financial implications for the federal government, as it will cost the Centre Rs 187 billion in additional expenditures if it agrees to keep the ministries and departments under its control for another year.
However, the 18th Amendment has recommended that the transfer of functions to the provinces be started from fiscal year 2011-12 and not FY2010-11.
With the approval of 18th Amendment, the federal government is unable to transfer such functions to the provinces at its preferred time, and is examining other options to share its financial obligations with the federating units, the sources revealed.
One of the proposals in this regard put before economic managers is to transfer projects worth Rs 68 billion to the provinces. The proposed projects are being financed by the federal government and are underway in all four provinces.
Allocation: Also, the Pay and Pension Commission headed by Dr Ishrat Hussain, former State Bank of Pakistan governor, has recommended the federal government allocate Rs 105 billion for the implementation of the commission’s recommended pay and pension reforms.
However, the government’s economic managers intend to keep the size of the package to Rs 45 billion due to excessive expenditures on security measures, whereas the country’s political leadership wants to make the package lucrative to the max for government employees.
The decision in this regard is likely to be made in a high-level meeting under Prime Minister Yousaf Raza Gilani by the last week of May.
Meanwhile, the imposition and collection of VAT on services that has been notified as the right of the federating units in a recently issued presidential order is the grounds on which Sindh is opposing the Federal Board of Revenue from collecting the levy.
On the other hand, the federal government has already committed with the International Monetary Fund to enforce VAT on goods and services through the FBR.
The commitment, however, is unacceptable to Sindh and the Centre is in a fix whether or not to take a political decision on the matter in order to full its pledge with the IMF.
Courtesy www.dailytimes.com.pk