War on error - Divisible pools, Undivided fools!

War on error: Divisible pools, Undivided fools! | War on error

NOV

28

Divisible pools, Undivided fools!

One popular saying of the wise goes that ‘in retrospect everyone is intelligent,’ but in the case of the much touted 7^th National Finance Commission award and the much celebrated 18^th Amendment in Pakistan’s constitution, the government of Pakistan can hardly say that looking back. Considering that imbroglio the government finds itself, the incumbents probably don’t want to look back at these achievements as significant anymore. And there are credible reasons why not.

It was envisaged that the devolution of governance from federal to provincial levels of governance enshrined in the 18^th Amendment and the magnanimity of the NFC award will result in improvements of regulations and better governance and not to mention a more robust revenue generation regime. None of that envisaged is being realized, despite best intentions believe experts. According to experts if anything, both these achievement have actually given rise to serious regulatory and governance issues and made it difficult to initiate fresh revenue generation measures both at the federal and provincial levels.

Some of these disturbing revelations have been made in a confidential report of study funded by the Competitive Support Fund — a joint initiative of the Government of Pakistan’s finance ministry and USAID — and prepared by a team of leading experts led by Shahid Javed Burki. The committee comprises of Dr Aisha G. Pasha, two former federal secretaries Ahmed Waqar and Shahab Khwaja, Dr Hilton Root, Imran Khan and Mehr Shah. Ostensibly the team was scheduled to share the report with all provincial chief ministers and the federal finance minister last week.

“The federal and provincial governments differ over the distribution of some financial assets like Workers’ Welfare Fund and Employees’ Old-Age Benefit Institution. The WWF’s financial deposits are estimated at Rs81 billion while the EOBI has assets worth Rs148 billion,” reviles the report. “The distribution of assets owned by autonomous bodies and attached departments of devolved ministries is also proving to be contentious as provinces are demanding the equitable distribution of assets, including that of geographically immovable fixed assets,” further discloses the report.

Interestingly, according to the experts on the team, the parliamentary implementation commission, which was setup to facilitate devolution, could not fully deliver before it ran out of life, as it officially ceased to exist effective 30 June this year. The limited time given to the implementation commission versus the expansive scope of the assignment it had on its hands left a big work in progress in its wake with no takers.

Overall, the budgeted increase in revenue transfers to the provinces due to the NFC Award in relation to the presidential order is Rs222 billion in 2010-11, but total transfers were diluted by about Rs180 billion as a result of lower-than-expected resources generation and 50 per cent increase in salaries of government employees announced by the federal government.

According to the report despite increase in provincial shares, the provincial governments believe that the devolved responsibilities should be funded by the federal government with additional revenue commitments. This impasse between the federal and the provincial levels of governance the experts believe revolves around three factors; first the NFC Award preceded the 18th Amendment so it could not have influenced the resource allocation decisions of the NFC because additional functional allocations to provinces had not been decided at that time.

Secondly, it is likely that the provinces will not receive a substantial portion of the additional revenues as was originally assured by the federal government, this is attributed to shortfalls in federal tax collections. Third, the federal government unilaterally announced a 50 per cent increase in salaries and allowances for government employees in the budget of 2010-11, which will deprive the provinces of a substantial proportion of the revenue gains. “The issue of financing the additional responsibilities devolved to the provinces therefore remains unresolved and is likely to be taken by the Council of Common Interest (CCI) going forward” states the report.

CSF report further highlights that despite the fact that NFC Award has expanded the basis for a significant sharing of resources with the provincial governments, the 18th Amendment made only modest changes in the allocation of fiscal powers between the two levels of government. “As such, the high dependence of provincial governments on federal transfers is likely to continue in the foreseeable future.”

Pakistani institutions, specially the key regulators are already ranked really low in terms of performance effectiveness in the world. Experts believe there are grave indications that the regulatory system will come under further stress as a result of devolution specially in the already fragile area of social service delivery. On the flip side, the process of devolution has been put on hold because the decision to devolve the Higher Education Commission (HEC) has been challenged in the Supreme Court. Moreover, the decision to devolve the Ministry of Health has raised concerns over international obligations such as commitment to the Millennium Development Goals (MDGs). “The impact of devolution on the regulatory system of Pakistan has not been fully appreciated. A likely consequence is that in some areas, particularly social service delivery, there may be setbacks as the provinces begin to reflect on their own regulatory requirements and priorities.”

Some things never change; in case of Pakistani style of governance it will always be the tentative and incomplete planning that will never change, this coupled of course with poor governance of those allegedly concerned-for-public leaders. Enough said?

The News International - Money Matters: Divisible pools, undivided fools!

Money Matters

Divisible pools, undivided fools!

By Irfan Aamir

One popular saying of the wise goes that ‘in retrospect everyone is intelligent’, but in the case of the much touted 7th National Finance Commission (NFC) award and the much celebrated 18th Amendment in Pakistan’s constitution, the government of Pakistan can hardly say that looking back. Considering the imbroglio which the government finds itself in, the incumbents probably don’t want to look back at these achievements as significant anymore. And there are credible reasons why not.

It was envisaged that the devolution of governance from federal to provincial levels as enshrined under the 18th Amendment and the magnanimity of the NFC award would result in improved regulations and better governance, and not to mention a more robust revenue genweration regime. None of that envisaged is being realised, despite best intentions believe experts. According to experts if anything, both these achievement have actually given rise to serious regulatory and governance issues and made it difficult to initiate fresh revenue generation measures both at the federal and provincial levels.

Some of these disturbing revelations have been made in a confidential report of study funded by the Competitiveness Support Fund — a joint initiative of the Ministry of Finance and USAID — and prepared by a team of leading experts led by Shahid Javed Burki. The committee comprises of Dr Aisha G. Pasha, two former federal secretaries Ahmed Waqar and Shahab Khwaja, Dr Hilton Root, Imran Khan and Mehr Shah. Ostensibly the team was scheduled to share the report with all provincial chief ministers and the federal finance minister last week.

“The federal and provincial governments differ over the distribution of some financial assets like Workers’ Welfare Fund (WWF) and Employees’ Old-Age Benefit Institution. The WWF’s financial deposits are estimated at Rs81 billion while the EOBI has assets worth Rs148 billion,” reviles the report. “The distribution of assets owned by autonomous bodies and attached departments of devolved ministries is also proving to be contentious as provinces are demanding the equitable distribution of assets, including that of geographically immovable fixed assets,” further discloses the report. 

Interestingly, according to the experts on the team, the parliamentary implementation commission, which was setup to facilitate devolution, could not fully deliver before it ran out of life, as it officially ceased to exist effective June 30 this year. The limited time given to the implementation commission versus the expansive scope of the assignment it had on its hands left a big work in progress in its wake with no takers.

Overall, the budgeted increase in revenue transfers to the provinces due to the NFC Award in relation to the presidential order is Rs222 billion in 2010-11, but total transfers were diluted by about Rs180 billion as a result of lower-than-expected resource generation and 50 per cent increase in salaries of government employees announced by the federal government.

According to the report despite increase in provincial shares, the provincial governments believe that the devolved responsibilities should be funded by the federal government with additional revenue commitments. This impasse between the federal and the provincial levels of governance, the experts believe, revolves around three factors; first the NFC Award preceded the 18th Amendment so it could not have influenced the resource allocation decisions of the NFC because additional functional allocations to provinces had not been decided at that time.

Secondly, it is likely that the provinces will not receive a substantial portion of the additional revenues as was originally assured by the federal government. This is attributed to shortfalls in federal tax collections. Thirdly, the federal government unilaterally announced a 50 per cent increase in salaries and allowances for government employees in federal budget 2010-11, which will deprive the provinces of a substantial proportion of revenue gains. “The issue of financing the additional responsibilities devolved to the provinces therefore remains unresolved and is likely to be taken by the Council of Common Interest (CCI) going forward,” states the report.

CSF report further highlights that despite the fact that NFC Award has expanded the basis for a significant sharing of resources with the provincial governments, the 18th Amendment made only modest changes in the allocation of fiscal powers between the two levels of government. “As such, the high dependence of provincial governments on federal transfers is likely to continue in the foreseeable future.”

Pakistani institutions, specially the key regulators are already ranked really low in terms of performance effectiveness in the world. Experts believe there are grave indications that the regulatory system will come under further stress as a result of devolution, especially in the already fragile area of social service delivery. On the flip side, the process of devolution has been put on hold because the decision to devolve the Higher Education Commission (HEC) has been challenged in the Supreme Court. Moreover, the decision to devolve the Ministry of Health has raised concerns over international obligations such as commitment to the Millennium Development Goals (MDGs). “The impact of devolution on the regulatory system of Pakistan has not been fully appreciated. A likely consequence is that in some areas, particularly social service delivery, there may be setbacks as the provinces begin to reflect on their own regulatory requirements and priorities.”

Some things never change; in case of Pakistani style of governance it will always be the tentative and incomplete planning that will never change, this coupled of course with poor governance of those allegedly concerned-for-public leaders. Enough said?

The writer is a Karachi-based 

communication consultant.

Irfan Aamir can be reached at:

irfan.aamir@gmail.com

Daily Times: 2 important developments: NFC Award and ratification of 18th Amendment

Saturday, November 26, 2011

2 important developments: NFC Award and ratification of 18th Amendment

Staff Report

KARACHI: Two extremely important developments have taken place in Pakistan recently - the announcement of the 7th National Finance Commission (NFC) Award in November 2009 and the parliament’s ratification of the 18th Amendment in April 2010.

Under the NFC Award an unprecedented 56 percent of revenue constituting divisible resources has been committed to the provinces.

Under the 18th Amendment 18 ministries have been devolved from the Centre to the provinces.

Together, the two initiatives aim at fundamentally restructuring the fiscal and functional equation between the central and provincial governments in the country.

Although the 18th Amendment is expansive in scope, the primary purpose of this study is to focus on the intergovernmental financial aspect of the process of devolution.

The study includes an assessment of the current public finance management practices of provincial governments and the human resource and regulatory impact likely to arise out of the restructuring exercise.

Eighteen ministries stand devolved to the provinces as a result of the amendment. The intent is to have a more rational and balanced distribution of functions between the federal and provincial governments, thereby leading to improved service delivery.

Amendments on the fiscal side are relatively minor; sales tax on services and capital value tax (CVT) on immovable property have been explicitly recognised as revenue sources in provincial jurisdiction.

The aim is to begin enhancing provincial own-tax revenue and curtailing dependence on federal transfers.

The roles of two councils, the Council of Common Interest (CCI) and the National Economic Council (NEC) have been enhanced.

The amendment states that future NFCs shall not reduce the share of resources allocated to the provinces by a previous commission. Provisions to monitor the implementation of the award have also been included. Provinces have been entitled to the entire proceeds of the excise duty on oil and natural gas, in addition to being given the authority to raise domestic or foreign loans with the consent of the federal government.

The office of the Auditor General of Pakistan (AGP) has been strengthened, giving it a constitutional four-year term of office. It has also been empowered to audit accounts of the federal and provincial governments and all of their bodies, corporations, and authorities.

An Implementation Commission (IC) was set up under Clause (9) of Article 270AA to monitor the devolution process. Members of the parliament constituted the IC under the chairmanship of Senator Raza Rabbani.

Although the share in total transfers for Sindh and Punjab show a small reduction compared to previous awards, the absolute rupee amount available to all provinces has increased: the largest increase in absolute value is for Balochistan (142 percent) and the smallest is for Sindh (40 percent).

Despite the increase, the provincial governments contend that the devolved responsibilities should be funded with additional revenue commitments by the federal government.

The federal and provincial governments differ over the distribution of some financial assets. Examples include the Workers’ Welfare Fund (WWF) and the Employees’ Old-Age Benefits Institution (EOBI). The WWF’s financial deposits are estimated at Rs 81 billion while the EOBI has assets worth Rs 148 billion.

The distribution of assets owned by autonomous bodies and attached departments of devolved ministries is also proving to be contentious as provinces are demanding the equitable distribution of assets, including that of geographically immovable fixed assets.

Overall, the budgeted increase in revenue transfers to provinces due to the 7th NFC Award in relation to the Presidential Order of 2006 is Rs 222 billion in 2010-11.

However, an important issue has been the actual realisation of this budgeted gain.

The total amount of transfers as envisaged by the 7th NFC Award is likely to be diluted by an estimated Rs 180 billion as a result of lower-than-expected resource generation and the 50 percent increase in salaries of government employees announced by federal authorities.

Overall, the cost of salary increases alone is estimated at about Rs 120 billion for the four provincial governments combined.

This will leave the provinces with net transfers of Rs 49 billion for 2010-11. Assuming that this state of affairs persists beyond this year, provincial annual liability for development projects alone would be of the order of Rs 51 billion. Around Rs 6-7 billion need to be added to this amount to reflect current expenditure on the functions being transferred to the provinces, bringing the additional annual burden on them to an estimated Rs 9-10 billion.

The NFC document clearly states the ‘provinces would initiate steps to effectively tax the agriculture and real estate sectors. Federal government and provincial governments may take necessary administrative and legislative steps accordingly’. There are indications that the regulatory system will come under stress as a result of devolution in the area of social services delivery.

For instance, the decision to devolve the Higher Education Commission (HEC), the agency responsible for developing education curriculums, was challenged in the Supreme Court. As a result, the process initiated as part of the devolution exercise was put on hold for further review by the CCI. Similarly, the decision to devolve the Ministry of Health (MoH) has raised concerns about the country’s international obligations such as commitment to the Millennium Development Goals (MDGs).

Punjab has reviewed 126 pieces of legislation and has prepared amendments to 27 of them. In Khyber Pakhtunkhwa (KP), Sindh and Balochistan, some progress has been made on the amendment and adoption of regulations required to receive and deliver functions devolved under the 18th Amendment.

Access to increased finances may result in increased current expenses by the provinces, at least in the short-term. Past experience indicates that this is usually due to sanctioning expenses that have been kept on hold in tighter budgetary scenarios, and include maintenance, procurement, and renewal of hardware. It is clear that the federal government’s fiscal position will deteriorate. Revenue receipts available to the federal government after provincial transfers are in the range of 55-64 percent of total expenditure.

Since federal expenditure is unlikely to fall in the short-term given its components of debt service payments and military expenses, the need to augment federal and provincial resources cannot be overemphasized.

It appears additional revenue transfers due to the 7th NFC Award will not be enough to finance the additional liability arising from the transfer of functions under the 18th Amendment.

Since the focus for development is largely expected to shift to the provinces along with simultaneous shrinkage in federal resource availability, sharper prioritization and rationalization of the federal PSDP has become indispensible.

Currently, the throw-forward of federal projects exceeds Rs 2.5 trillion for 2,000 projects under implementation. With an annual PSDP of more than Rs 200–300 billion, on-going projects may take up to 15 years to complete, which implies huge time and cost overruns.

DAWN Editorial: Devolution problems | Newspaper | DAWN.COM

Editorial: Devolution problems | Newspaper | DAWN.COM

Devolution problems

GIVEN that Pakistan has had a highly centralised governance structure since Independence, the devolution of power as envisaged by the 18th Amendment was bound to be a complex affair. This has proven to be true, for in the year and a half since the landmark legislation was passed, there have been teething problems, such as the absorption of employees of devolved departments. 


The latest issue to crop up has been of the division of assets. As reported in this paper, the federal government and the provinces seem to be locked in a tussle over financial assets worth over Rs230bn along with physical assets belonging to the Workers` Welfare Fund and the Employees` Old-Age Benefit Institution. The issue has been raised in a confidential report authored by the finance ministry and USAID.

If this and other issues that may arise are to be resolved amicably between the centre and the provinces, it is important to revisit the spirit of the 18th Amendment. The legislation was passed with the consensus of all political parties in parliament, hence its guiding principles must be respected. Particularly, the moving spirit of the law — that of democratic participatory federalism — must not be lost sight of. And to realise such lofty goals it is essential to reconcile conflicting economic interests both among the federating units and between the provinces and Islamabad. The 18th Amendment very clearly states that the shares of the provinces in federal services, including autonomous bodies and corporations, must be given to them. Hence the funds mentioned above need to be transferred without hindrance. There has been criticism of the provinces lacking the capacity to handle devolved responsibilities. But then, in certain areas the federal government has just as poor a record where capacity is concerned. Therefore, capacity building is required at both levels and should be complementary, and must not be used as an excuse to withhold powers or funds.

Workers' Welfare Fund - the Cash Cow 

We feel that a long-term mechanism is needed to resolve such issues. The implementation commission that was supposed to oversee the process of devolution was wrapped up in June. Until all outstanding issues are finalised and devolution is complete — which may be an open-ended process — an authority is required to resolve disputes over assets and other details. Parliament is perhaps the ideal forum to do this, as it was parliament which laid the groundwork for devolution. If the implementation commission cannot be revived perhaps the Council of Common Interests can be tasked with monitoring devolution. But for this the CCI will have to play a more active role, primarily by meeting at regular intervals.

Competitiveness: DAWN: Devolution: Centre, provinces still fighting over share in assets

Competitiveness: DAWN: Devolution: Centre, provinces still fighting over share in assets

Devolution: Centre, provinces still fighting over share in assets

Khaleeq Kiani | Back Page | From the DAWN Newspaper

ISLAMABAD, Nov 20: Eighteen months after the passage of the 18th Amendment, the federal and provincial governments are still fighting over their shares in more than Rs230 billion worth of financial assets and large numbers of physical assets of various public sector corporations.

The 18th Amendment and the Seventh National Finance Commission award have also given rise to serious regulatory and governance issues and made it difficult to initiate fresh revenue generation measures both at the federal and provincial levels.

These are the main points highlighted in a confidential report of study funded by the Competitive Support Fund — a joint initiative of the finance ministry and USAID — and prepared by a team of experts led by Shahid Javed Burki and comprising Dr Aisha G. Pasha, two former federal secretaries Ahmed Waqar and Shahab Khwaja, Dr Hilton Root, Imran Khan and Mehr Shah.

The team will share the report with chief ministers and the federal finance minister this week.

“The federal and provincial governments differ over the distribution of some financial assets like Workers’ Welfare Fund and Employees’ Old-Age Benefit Institution. The WWF’s financial deposits are estimated at Rs81 billion while the EOBI has assets worth Rs148 billion,” said the report, a copy of which is available with Dawn.

“The distribution of assets owned by autonomous bodies and attached departments of devolved ministries is also proving to be contentious as provinces are demanding the equitable distribution of assets, including that of geographically immovable fixed assets,” it said.

The implementation commission that was set up to facilitate devolution could not fully deliver, given the limited time available to it and the scope of its assignment as it ceased to exist on June 30 this year.

Overall, the budgeted increase in revenue transfers to the provinces due to the NFC Award in relation to the presidential order is Rs222 billion in 2010-11, but total transfers were diluted by about Rs180 billion as a result of lower-than-expected resources generation and 50 per cent increase in salaries of government employees announced by the federal authorities.

The report says that despite percentage increase in provincial shares, the provincial governments contend that the devolved responsibilities should be funded by the federal government with additional revenue commitments. This is based on three points; first the NFC Award preceded the 18th Amendment so it could not have influenced the resource allocation decisions of the NFC because additional functional allocations to provinces had not been decided at that time.

Second, the provinces will not receive as large a portion of additional revenues as was originally claimed by the federal authorities due to shortfalls in federal tax collections. Third, the federal government unilaterally announced a 50 per cent increase in salaries and allowances for government employees in the budget of 2010-11, which will deprive the provinces of a substantial proportion of the revenue gains. “The issue of financing the additional responsibilities devolved to the provinces therefore remains unresolved and is likely to be taken by the CCI going forward.”

The report says that although the NFC Award expanded the basis for a significant sharing of resources with the provincial governments, the 18th Amendment made only modest changes in the allocation of fiscal powers between the two levels of government. “As such, the high dependence of provincial governments on federal transfers is likely to continue in the foreseeable future.”

The experts found that there were indications that the regulatory system will come under stress as a result of devolution in the area of social service delivery. There is already uncertainty with respect to functions of the federal government. For instance, the process of devolution has been put on hold because the decision to devolve the Higher Education Commission has been challenged in the Supreme Court.Similarly, the decision to devolve the ministry of health has raised concerns over international obligations such as commitment to the millennium development goals. “The impact of devolution on the regulatory system of Pakistan has not been fully appreciated. A likely consequence is that in some areas, particularly social service delivery, there may be setbacks as the provinces begin to reflect on their own regulatory requirements and priorities.”

Also a possible impact of increased transfers from the centre could be reduced fiscal effort in terms of own tax revenue generation and collection by the provinces. “A continuation of the imbalance in fiscal responsibility is likely to be damaging for the federal as well as provincial governments in terms of unmet fiscal targets and inadequate resource availability for improved services delivery,” says the report, adding “it is clear that centre’s fiscal position will deteriorate.”

The article is available on Dawn website: http://www.dawn.com/2011/11/21/devolution-centre-provinces-still-fighting-over-share-in-assets.html

The Author is a leading journalist from Pakistan, writing for the daily DAWN.

He can be reached at: Khaleeqkiani@gmail.com

DAWN: Devolution: Centre, provinces still fighting over share in assets

Devolution: Centre, provinces still fighting over share in assets

21-November 2011

Devolution: Centre, provinces still fighting over share in assets

Khaleeq Kiani | Back Page | From the DAWN Newspaper

ISLAMABAD, Nov 20: Eighteen months after the passage of the 18th Amendment, the federal and provincial governments are still fighting over their shares in more than Rs230 billion worth of financial assets and large numbers of physical assets of various public sector corporations.

The 18th Amendment and the Seventh National Finance Commission award have also given rise to serious regulatory and governance issues and made it difficult to initiate fresh revenue generation measures both at the federal and provincial levels.

These are the main points highlighted in a confidential report of study funded by the Competitive Support Fund — a joint initiative of the finance ministry and USAID — and prepared by a team of experts led by Shahid Javed Burki and comprising Dr Aisha G. Pasha, two former federal secretaries Ahmed Waqar and Shahab Khwaja, Dr Hilton Root, Imran Khan and Mehr Shah.

The team will share the report with chief ministers and the federal finance minister this week.

“The federal and provincial governments differ over the distribution of some financial assets like Workers’ Welfare Fund and Employees’ Old-Age Benefit Institution. The WWF’s financial deposits are estimated at Rs81 billion while the EOBI has assets worth Rs148 billion,” said the report, a copy of which is available with Dawn.

“The distribution of assets owned by autonomous bodies and attached departments of devolved ministries is also proving to be contentious as provinces are demanding the equitable distribution of assets, including that of geographically immovable fixed assets,” it said.

The implementation commission that was set up to facilitate devolution could not fully deliver, given the limited time available to it and the scope of its assignment as it ceased to exist on June 30 this year.

Overall, the budgeted increase in revenue transfers to the provinces due to the NFC Award in relation to the presidential order is Rs222 billion in 2010-11, but total transfers were diluted by about Rs180 billion as a result of lower-than-expected resources generation and 50 per cent increase in salaries of government employees announced by the federal authorities.

The report says that despite percentage increase in provincial shares, the provincial governments contend that the devolved responsibilities should be funded by the federal government with additional revenue commitments. This is based on three points; first the NFC Award preceded the 18th Amendment so it could not have influenced the resource allocation decisions of the NFC because additional functional allocations to provinces had not been decided at that time.

Second, the provinces will not receive as large a portion of additional revenues as was originally claimed by the federal authorities due to shortfalls in federal tax collections. Third, the federal government unilaterally announced a 50 per cent increase in salaries and allowances for government employees in the budget of 2010-11, which will deprive the provinces of a substantial proportion of the revenue gains. “The issue of financing the additional responsibilities devolved to the provinces therefore remains unresolved and is likely to be taken by the CCI going forward.”

The report says that although the NFC Award expanded the basis for a significant sharing of resources with the provincial governments, the 18th Amendment made only modest changes in the allocation of fiscal powers between the two levels of government. “As such, the high dependence of provincial governments on federal transfers is likely to continue in the foreseeable future.”

The experts found that there were indications that the regulatory system will come under stress as a result of devolution in the area of social service delivery. There is already uncertainty with respect to functions of the federal government. For instance, the process of devolution has been put on hold because the decision to devolve the Higher Education Commission has been challenged in the Supreme Court.Similarly, the decision to devolve the ministry of health has raised concerns over international obligations such as commitment to the millennium development goals. “The impact of devolution on the regulatory system of Pakistan has not been fully appreciated. A likely consequence is that in some areas, particularly social service delivery, there may be setbacks as the provinces begin to reflect on their own regulatory requirements and priorities.”

Also a possible impact of increased transfers from the centre could be reduced fiscal effort in terms of own tax revenue generation and collection by the provinces. “A continuation of the imbalance in fiscal responsibility is likely to be damaging for the federal as well as provincial governments in terms of unmet fiscal targets and inadequate resource availability for improved services delivery,” says the report, adding “it is clear that centre’s fiscal position will deteriorate.”

The article is available on Dawn website: http://www.dawn.com/2011/11/21/devolution-centre-provinces-still-fighting-over-share-in-assets.html

The Author is a leading journalist from Pakistan, writing for the daily DAWN.

He can be reached at: Khaleeqkiani@gmail.com

HelloArticle.com - Competitiveness Support Fund provides technical assistance to the Federal Board of Revenue in Pakistan

HelloArticle

HelloArticle.com - Competitiveness Support Fund provides technical assistance to the Federal Board of Revenue in Pakistan

Competitiveness Support Fund provides technical assistance to the Federal Board of Revenue in Pakistan

Category: Finance

The Federal Board of Revenue received in-depth training on the financial reporting, taxpayer audit, revenue analysis and tax policy capacity. As a result of these trainings FBR will implement new ITMS and use a data warehouse for more effective and efficient tax collection for FY 2012 and onwards.

The Government of Pakistan realized the need for such an intervention, when the country was unable to send correct data and assessment on its financial forecasting and reporting to international institutions, which raised doubts among the bilateral and multilateral agencies.

The U.S. Agency for International Development/Pakistan (USAID) proposed to initiate and finance a collaborative tax administration program (TAP) with the Federal Board of Revenue (FBR) of the Government of Pakistan (GoP). The objective of the program was to provide assistance, to build FBR capacity and to transform the FBR into a more transparent, efficient, accountable public sector organization, with enhanced capacity for service delivery. To conduct TAP’s review, the Competitiveness Support Fund (CSF) designed a training programme in a manner that built the capacity of the FBR officials on real time data. It established a team consisting of experts like Mr. Muhammad Abdullah Yusuf, Dr. Ather Maqsood Ahmed and Mr. Habib Fakhruddin, and Mr. Edward Koos along with Dr. Ashfaq Hassan.

The trainees had hands on experience in managing and implementing analytical financial systems using state of the art tools. The trainees were also equipped with the knowledge of operating the new information technology management systems at FBR.

In a statement, Shahab Khawaja, the Chief Executive Officer of the Competitiveness Support Fund said that “Pakistan needs to put in a more transparent and effective system in tax collection and the timeframe to pay taxes ��" therefore, expanding tax base by improving compliance, bringing the currently untaxed areas into the tax system and formalizing almost 40% of Pakistan’s informal economy have been the keys areas of our focus of this capacity building initiative”.

He also added“50 senior to mid-level management officials were trained to promote a culture of informed decision-making and policy formulation by strengthening the automation and research capacity of the FBR for maximum efficiency and transparency of systems and processes. The training program is also building up capacity for better revenue forecasting.”

CSF as a partner institute of the World Economic Forum (WEF) has identified key economic challenge related to taxation issues in The Financial Development Report 2010 and the Financial Development Index (FDI). According to these reports, Pakistan was ranked at 54 among 57 economies, losing 6 points from its previous position of 49 in 2009. However Pakistan does well on the distortive effect of taxes and subsidies on competition, where it has been ranked at 38 out of 57 economies.

Former Chairman FBR and the Lead Consultant for the training programme, Muhammad Abdullah Yusuf said, “Pakistan needs to focus on improving the financial reporting gaps, CSF has provided technical assistance to FBR and other institutions of the Government of Pakistan on key focus areas including taxpayer education and public outreach, information technology and management systems and data warehouse, taxpayer audit with revenue analysis and tax policy capacity.”

CSF has worked on assessing the current FBR tax administration functions and identified areas where reforms were needed; it also reviewed the current and past tax technical assistance projects and identified any gaps in assistance provided to the FBR. CSF also designed a work-plan that sets forth specific tasks to be performed within each proposed area of assistance.

CSF is based on international best practices (India, Thailand, Turkey, Ireland, Finland etc.) to strengthen and make the private sector more competitive and to improve the policy framework needed for innovation-based competitiveness. USAID has been providing financial support to CSF for carrying out its activities. The Competitiveness Support Fund is supporting Pakistan’s goal of a more competitive economy by providing input into policy decisions, working to improve regulatory and administrative frameworks and enhancing public-private partnerships within the country.

CSF is also providing technical assistance and co-financing for initiatives related to entrepreneurship, business incubators and private-sector led initiatives with research institutes and universities that contribute to creating a knowledge-driven economy. CSF activities are helping all producers along the value chain that contribute to ultimate product quality. By obtaining better value and better prices for quality products, and improving cooperation throughout the Pakistani economy, the CSF is contributing to poverty alleviation by providing more income for producers and better employment prospects for employees.HelloArticle.com