Evidently, the Eighteenth Amendment and the Seventh National Finance Commission (NFC) Award have considerably assuaged anti-centre and anti-Punjab sentiments, at least in the financial context. It is, therefore, imperative to further entrench the democratic process of decentralisation and redistribution of resources. Sadly, efforts are afoot to roll back the benefits of the Seventh Award. Instead of expanding its revenue base, the federal government is impoverishing the provinces for its own inefficiencies and failures evident in its misplaced fiscal and foreign policies - It’s Not the NFC Award, Shahab Usto, Dawn, April 6, 2024.

It is heartening to know that in the wake of the notification of the Eleventh National Finance Commission (NFC) and its inaugural meeting on December 4, 2024, a separate group, chaired by the Finance Minister of Khyber Pakhtunkhwa, has been tasked with improving the tax-to-GDP ratio. This group, for its report, must seek input from experts who have been pointing out impediments entrenched in our target-oriented, rotten, outdated, oppressive, anti-people, and anti-growth tax system, both at the federal and provincial levels.

There is an urgent need to deconstruct the existing tax systems and, at the same time, reconstruct a fair, equitable, and pro-growth federalised tax system conforming to Pakistan’s specific needs and future challenges. The prescriptions of the International Monetary Fund, World Bank, and other donors and lenders have miserably failed to reform our tax system; they have now openly admitted this fact in their recent reports, which are not only shallow but also fall short of accepting the blame for their faulty policies.

Unfortunately, the debate about the NFC vis-à-vis Article 160 of the Constitution of Pakistan, both at official and public platforms, misses the point that this provision does not prescribe any particular formula for the distribution of net tax proceeds among provinces. It, in fact, requires equitable sharing and/or distribution of resources between the federation and the provinces. The issue is not one of vertical or horizontal distribution of taxes, but of giving the provinces full autonomy, including the exclusive right to levy and collect taxes on goods and services generated in their respective geographical areas.

Judicial Activism Ensures Rights And Checks Executive Overreach

The provinces, in all previous NFCs, have failed to highlight that the federal government, in utter violation of the Constitution, was collecting taxes that fall exclusively within their domain. To this day, the provinces have not worked out their actual share in the divisible pool. Nearly 70 per cent of federal tax collection is on account of indirect taxes (including petroleum and gas levies), even under the garb of the Income Tax Ordinance, 2001. The provinces are not even........

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