NFC change by Dawn Editorial

THE new notification issued by the PTI government changing the composition of the 10th National Finance Commission and tailoring the language of its terms of reference is but a clever attempt to tackle legal challenges without retreating on the centre’s demand for the provinces to share the burden of federal expenditure. The new notification removes the prime minister’s adviser on finance and the federal finance secretary from the NFC to meet constitutional stipulations in anticipation of an adverse ruling by the Islamabad High Court in a case filed by the PML-N. The Balochistan High Court has already struck down these appointments and ruled against the inclusion of any agenda other than the determination of the formulae for the vertical and horizontal division of tax resources between the centre and provinces. Yet the former appears determined to pursue its aim of getting the federating units to chip in with significant amounts from their existing divisible tax pool share under the seventh NFC award to pay federal bills — even if such a demand violates constitutional provisions. In doing so, the centre has again exposed itself to fresh judicial scrutiny because the commission is constitutionally mandated to deliberate only on the division of financial resources and not on sharing expenditure. Thus, it may further delay deliberations on the new NFC award.

Since its inception, the PTI government has seldom tried to conceal its aversion to the administrative and financial autonomy given to the provinces under the landmark 18th Amendment and the seventh NFC award. It comes as no surprise if it attempts to somehow clip provincial powers and slash provincial shares from the divisible pool. Earlier this month, the party had helped a move in the Senate to amend the constitutional provision (introduced under the 18th Amendment) that protects existing provincial shares from the divisible pool under the seventh award and bars the centre from reducing it in future. The proposed bill was rejected by the opposition. Given that none of the provinces, including those ruled by the PTI, are in favour of a reduction in their share, the centre is unlikely to achieve its objective at the NFC forum. A better way would be to implement tax administration and policy reforms for increasing the size of the pie. For the interim, it should discuss its financial troubles and debt payments with the provinces at the CCI platform instead of using the back door to ambush them.

Published in Dawn, July 24th, 2020

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