1. NFC Award & Federal Divisible Pool:- Pakistan is based on fiscal federalism. It is an arrangement in which taxes and of a Federal Di the principle of Tesources are made part mn among the federating le resource distribution, isible Pool for subsequent redistributio units through fiscal equalisation, inclusiveness and equitab! Fiscal decentralisation, inclusiveness and equalisation are the central tenets of federalism for which the National Finance Commission (NFC) provides the institutional mechanism. Article 160 of the constitution provides for the NFC (Annex-A). It clearly delineates the composition of NFC and the Federal Divisible Pool (FDP) along with a timeframe for the NFC Award, The 7th NFC award (Annex-B) increased the share of provinces to 57.5 percent and also introduced multiple-indicator formula for horizontal resource distribution, giving 82 percent weightage to population, 10.3 percent to poverty, 5 percent to revenue generation and 2.7 percent to inverse population density. National Finance Commission — Sharing Formul: ‘The sharing formula of NFC has been varying over the years and at present criteria of distribution is amongst provinces is based on following weightage formula. Description Weightage Population ons _ Backwardness/Poverty as ie Revenue collection/Generation ot | Inverse population densit eeh28. Scanned with CamScanner— ee a | NFC Sharing Formula | ‘= Population | ‘= Backwarness/poverty ‘= Revenue Collection/Generation ‘Inverse Population Density Federal Budget Estimates 2020-21- Federal Revenue Heads (Annex-C) S$ No | Description Budget Est 2020- | Annexure 21 Rs. (Billion) 1. Direct taxes (Taxes on Income, 2043 D CVT, ete) 2. _ | Indirect taxes (Sales Tax, 2920 Customs Duty, Federal Excise E Duty) 3. Other Taxes (Mobile handset 501 F levy, Petroleum levy, Airport Tax, Etc ) 4, Non Taxes revenue 1108 G (Miscellaneous receipts, PTA receipts, Law & order receipts , General Administrative receipts etc) Total 6572 * All above mentioned taxes are applicable on civilian residents of Cantonment as on all other citizens of Pakistan. Scanned with CamScanner;, Total amount given by Federal Govt. through NFC Award to Provinces 2020-21 Sr. Province Federal Divisible In Billion 4 Pool : (™) i. Punjab 1.811,808.479 T8118 z. Sindh 606,703.1 606.7 3. KPK 496,367.257 496.3 4 Balochistan 326,287 326.2 TOTAL 3,241,165.836 3241.1 57.5 % of this amount will be given to Provinces through NFC award as per current formula of distribution. 4, Provincial Budgets ‘As there are three tiers of Govt. in Pakistan a) Federal. b) Provincial. c) Local. rmula with the third tier of Govt. (local ainly contribution through NFC Award. ovts. reached upon through Provincial Provinces make a sharing fo1 Govt.) out of their resources which are m Provinces then have sharing among its local G Finance Commission. Scanned with CamScanner5, The Provincial Finance Commission: eee) The Provincial Finance Commission Aw: award is the term referred to a formula for vertical = tom an se financial resources between province and the local governments (LGs) oy none different LGs. The commission is responsible to make recommendations ari government on a formula for resource distribution including: i. Distribution of the provincial Consolidated Fund between the Provincial Government and the eal governments into a Provincial Retained Amount and a Provincial Allocable Amount. ji, Distribution of Provincial Allocable Amount amongst the local governments a share of each local government; and iii. Distribution of amounts received by the Government in lieu of Octroi and Zila Tax amongst the local governments. The Provincial Consolidated Fund (PCF). Details given in Chapter-14 of PLGA 2013 (Annex-H). Dist ion of Resources Through PFC: Provincial lore Cs) Fund PFC Formula Vertical Distribution eer Sorte Amount PFC | Honzontal Formula | Distribution Local Governments Scanned with CamScanner‘The Punjab Province formula devised by the award for distributi ution of sjopment funds among districts g; % weigl evel? gave 67% weightage to the Population and 33% to the backwardness. As far as intr-distriet_ distribution of the jpovermentioned development funds is concemed the PFC award gave 75% sh 6 share to at 2 i ici the districts and 25% to the Tehsil Municipal Administrations (TMAs). 6, The Cantonments : There i 4.7 Million populations (as per Census 2017, now population exceeds 5 Million) of Pakistan, which lives in 44 Cantonments all across the country. ‘The Cantonment wise and province wise breakup is enclosed as (Annex-J), As population of Pakistan (in four Provinces) is 200,766,272 as per Census of 2017, percentage of population living in cantonments come to 2.34 %. These residents are subject to all Federal taxes, duties, fees, cesses, and charges. These residents are also subject to all direct and indirect taxes. Which includes: i. Income Tax GST (General Sales Tax) Corporate Income Tax Federal Excise Duty y. Withholding Tax vi. Value Added Tax (VAT) vii, Capital Gain Taxes viii, Payroll Tax ix. Wealth Tax x. Custom import duty xi. Petroleum Levy xii, Misc. receipts xiii, Law & Order receipts xiv. Stamp duty xv. Allother dit ‘rect and Indirect taxes Scanned with CamScannerprovince Wise Cantonment Po; ulation: province Wise Cantonment Population: Provice No. of Cantts Total Cantt % Population of Population Provinee(2017) 20 110,012,442 3,223,296 2.9 08 47,886,051 997,761 21 a 30,523,371 374,445 1.2 04 12,344,408 108,227 0.9 43 200,766,272 4,703,729 2.3 | Graphical Representation of Cantt Population = Punjab Sindh | = PK | ‘= Balochistan Scanned with CamScannerg, Issue In Hand: Civilian residents of Cantonments which make up 2.3 % of National population are not part of National or Provincial resource sharing formula despite the fact that they are subject to all Federal Govt. Taxation. This inequality and injustice has reduced Cantonment Boards (Local Govt.) to non-performing entities and most CBs just struggle to give salaries to its staff. CBs are unable to master plan their areas of responsibility. No major undertaking has been done by any Cantonment Board as integrated issues of capacity building, planning and execution cannot be done without robust and sizable allocation streams out of national financial resources at par with other Local Govts. in provinces. Local Govt. (including Cantonment Boards) all over the country apply some local taxes / fee against some services but these are not enough to make infrastructural upgradation of the areas. Provincial Finance Commission distributes share amongst Local Govt. but does not count in Cantonment areas and Cantonment Boards despite calculating civilian population of Cantonments as part of population of their provinces. No Cantonment Board in Pakistan has the financial capability to construct. any meaningful project like overhead bridge, underpass, main sewerage system, water supply system, water treatment system or acquire lands for graveyards, parks etc or to do master planning of their Cantonments. Due to this lack of acknowledgement and equitable sharing of resources, Cantonment Boards have survived over the years by disposing of their properties in one way or the other and now the properties have almost exhausted. Scanned with CamScannerper Head Share of Cantonments In Federal Di le Pool: a Federal Divisible | Population | Per Head | Population) Rightful ; Fool Share | of Cantts Cantonment | (M) | () Share being | | denied gs | ree eeeeeeesneees | enrstEeee _™) 1,811,808.479 | 110,012,442) 0.016 | 3,223,296 51573 "Sindh 606,703.1 | 47,886,051 | 0.013 997,761 12,971 KPK 496,367.257 | 30,523,371 | 0.016 | 374,445 | 5,991 Balochistan 326,287 12,344,408 | 0.026 | 108,227 2814 ~~ TOTAL 3,241,165.836 | 200,766,272 0.071 | 4,703,729 73,349 | | | OF 73349 Bn 9. WAY FORWARD Option-1: Federal Govt. directly and proportionally gives share to Cantonments out of share of Provinces proportionate to civilian population of Cantonments in that Province. Optio Provinces should be asked to give share of Cantonment residents out of Federal Govt. Contribution from Federal Divisible pool and make Cantonment Boards part of their allocations to local Govts. through Provincial Finance Commission. Option-3; A Constitution petition may be lodged in Islamabad High Court on Fundamental rights basis as not being treated equally in terms of resources distribution as Cantonment are integral part of Provinces but are being treated unfairly. A leading Constitutional lawyer can be arranged. Scanned with CamScannervo pROBABLE QUESTIONS 10. CANTONMENTS ALREADY 0 FROM PROVINCIAL GOVERNMENT OCTROI SHARE The octroi shares iven ii are given in exchange of abolition of octroi duty against ch Federal Govt. increased 1% wie @ GST. Federal Govt. remits octroi share to all qunicipalities, which abolished octroi duty, MNAs, MPAs CONTRIBUTE F THEIR CONSTITUENCIES POR DEVELOPMENT. OF Q Sometimes it happens but there is no formula agreed upon between provinces and Cantonments and secondly, there works are few and far between and don’t give any regular income to Cantonments. That is why Cantonment are facing financial crunch mostly. Q PROVINCIAL GOVT. HAS FEW ROADS, HOSPITALS AND EDUCATION INSTITUTION WORKING IN CANTONMENTS. IT IS ALSO CONTRIBUTION FOR PROVINCIAL GOVT. ‘These institutions are also quite few and far-between. The responsibilities health is not shared properly by Provincial Govt. far instance, of education, : . ment have population of about one million but no Rawalpindi and Chaklala Canton! . it, is in place. health facility of Provincial Govt. is in place BOARDS DO LOCAL TAXATION SO THEY DO Q CANTONMES HIS ALLOCATION ENT NOT DESERVE jmila i they all get ‘i do similar local taxation, fee, charges ete but! y all ge Jocal bodies al A ovt. thro! deral ugh Provincial Govt. List of Local Govt Taxation share from Fe attached as (Annex): Scanned with CamScanner