Tax rates to go up By Mohammad Ali Khan

The Khyber Pakhtunkhwa government will not levy any new tax in the next budget. However, the rates of existing taxes may be revised upwards to generate more revenues for growing security and developmental needs.

According to the provincial finance minister, higher federal transfers of funds under 7th NFC award and other accounts will help to substantially increase the Annul Development Programme (ADP), but financial constraints will remain.

The next year’s development budget (core provincial component) would be over Rs50 billion compared to Rs32 billion in the outgoing financial year. Major portion of the funds will go to the ongoing projects, enabling the executing agencies to complete them within the specified time schedule.

The provincial government intends to initiate couple of hydro power generation projects apart from expanding the coverage of Bacha Khan Poverty Alleviation Project, which was launched last year in four districts.

Similarly, discretionary funds of Rs10 million for each MPA under Tameer-e-Sarhad Programme would be part of the next year ADP.

Khalid Aziz, a development sector expert, says that this strategy of investment in bricks and mortar would not work in a situation, where people are fast losing trust in the existing system.

In his view, the fiscal space created by the NFC award should be utilised to mitigate risks and factors that have led to growing public discontent.

Mr Aziz said investment should be made for improving service delivery in areas like education, health, drinking water and social safety nets. “If the government doesn’t do this, the forthcoming budget will be no different from the past,” he concluded.

The Khyber Pakhtunkhwa government expects to receive almost 50 per cent more than the resources under the NFC award from the federal government in the next financial year, compared to budgetary projections 2010.

Also, the province is set to receive Rs15 billion or one per cent of the undivided Federal Divisible Pool, as decided by the NFC to help the provincial government to manage the impact of militancy, a senior officer of the finance department told Dawn.

For the outgoing fiscal year, the government had projected straight federal transfers of Rs7.549 billion but the actual receipts may be higher. The next year’s projection under this head is over Rs10 billion, the official said.

Sources revealed that the provincial political leadership secured last week assurance from the prime minister about the release of the second instalment of net hydro profits of Rs25 billion when a delegation of coalition parties met him.

The federal government had approved Rs24 billion for capacity building of the civilian law enforcement agencies in Khyber Pakhtunkhwa (PK). Of this, first instalment of Rs6 billion was released last fiscal year and the amount was spent on procurement of vehicles and weapons for the police.

The PK government also bears expenses to meet growing demand of its police, fighting a full-fledge insurgency in almost 90 per cent areas of the province.

In the outgoing financial year, the provincial government had allocated Rs9 billion for the police, while in the next fiscal it intends to allocate at least 20 per cent more.

Taking care of internally displaced persons (IDPs) and reconstruction and rehabilitation of the conflict-hit population is also a major fund-eating area, the provincial government will face the next fiscal year. A sum of Rs8 billion will be allocated for different projects aimed at rehabilitation of the families affected by militancy.

In fact a majority of the currently displaced families belong to the Federally Administrated Tribal Areas (FATA), but it is the Pakhtunkhawa civil administration that is currently looking after them. In addition to the administrative cost, the provincial government has spent Rs250 million in recent months to feed these IDPs from FATA.

In the next fiscal year, the government’s wage bill would also shoot up because of regularisation of over 5000 public sector employees, earlier recruited on contractual basis, as well as the possible impact of 20 to 30 per cent raise in pays of its employees.

About 8000 new jobs in health and education department will be created against recently completed uplift schemes and that will put the provincial exchequer under more financial stress.

Source: http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/in-paper-magazine/economic-and-business/tax-rates-to-go-up-760