PPI Original Text (PPI-OT) – Province of Sindh’s Budget2012-13 by Muttahida Quami movement Prologue

Karachi, June 01, 2012 (PPI-OT): The monetary policy and fiscal policy are the twin instruments that sustain the economy- whether of a welfare state, a federation, a third world country, a capitalistic or a socialist state. The organization responsible for the conduct of a nation’s monetary policy is the central bank, called State Bank of Pakistan in our country.

The public sector economy or to be more precise the fiscal economy is administered by the Government through its ministry or division of finance. In the present day world almost all countries, in the strict sense, are neither pure capitalistic in outlook as visualized by Adam Smith nor socialistic as conceived by Karl Marx. Of late the concept of mixed economy has emerged as a gospel truth.

In the present context we confine our analysis to the functioning of that part of the government that relates to levying and collection of taxes, public spending in the realm of education, health, social welfare, security net work etc., and regulations, subsidies to alter the behaviour of private sector, that is incorporated in a public document called Annual Budget Statement (ABS).

The revised budget is also laid before the Assembly along with the presentation of the next year’s budget somewhere in the earlier part of the month of June and is approved by the Assembly before 30th June.

The ABS consists of two parts, on Expenditure side- Charged Expenditure and Voted or non-charged Expenditure and on the Revenue side it contains Current Revenue Budget, Capital Budget and Development Budget. The Revenue Receipts and Expenditure relating to all revenues, all loans received, and revenue, capital and development expenditure respectively form Provincial Consolidated Fund.

All the other moneys received by or on behalf of the Provincial Government or received by or deposited by persons or institutions (like security deposits, welfare fund, pension fund, cash balance with Banks etc) are credited to the Public Accounts of the Province.

Ever since the first annual budget of Pakistan was laid before the Constituent Assembly (Legislature) by Ghulam Muhammad and by M.A. Khuro in the Provincial Legislative Assembly of Sindh in late 1947, the form, substance and tenor of the budgetary document has not changed much.

Instead of taking innovative measures, we are following the calf path in the words of Sam Walter Foss for the last 64 years. Lacking dynamism, it continues to be an Accounting Budget with no relevance either to its performance or to its impact on the overall state of economy.

Expenditure not provided in the budget is incurred without any justification, which is approved by the brute majority of the Assembly at the time of presentation of the Budget in the month of June.

Throughout the fiscal year – July to June, no debate or discussion, on its monitoring or evaluation, is held in the Assembly. Though under the provisions of Article 122 (2) of the Constitution the Assembly may assent to any demand for grants, subject to a reduction of the amount specified therein but such “cut motion” is never permitted. Even under Rule 121 and 123 of the Rules of Procedure of the Provincial Assembly of Sindh, cut motions – “disapproval of policy cut”, “economy cut”, and “Token cut” are not entertained and endorsed by the majority party without any rhyme or reason.

If it is a participatory democracy, why such denial of rights to the elected Members of the Assembly is preached and practiced? We are still following the calf path in making a distinction between “Voted Expenditure” and “Charged Expenditure”. There is no reason that the “charged Expenditure” is not voted by the Members.

Altaf Hussain- the Founder Visionary Leader of Muttahida Quami Movement (MQM), who wrought change in the complexion of the Assemblies by inducting the middle and low middle class, and who by throwing gauntlet to the hereditary (maurusi) politicians, now seeks to transform the Economics of Public Sector that conforms to the ideals of a Welfare State. Inter alia the objectives are:

OBJECTIVES

Reversal of the ratio between direct and indirect taxes

Increase of the tax to GDP ratio through increase of direct taxes (progressive taxation and widening of the tax net)

Taxing all taxable income

Drastic reduction of non-development and so-called (un-viable) development expenditure

Drastic reduction of public debt

A curb on the powers of the government to incur expenditure outside the Budget

Reduction of disparity between higher and lower income group – (Equity-Efficiency trade-off) [The number of multi-millionaire / crorepati (account holders) have increased from 24,423 in 2008 to 36,000 in December 2011 as per State Bank’s Report

Plugging the leakages by eradication of corrupt practices and corruption from the tax collecting agencies

Provision of social security/insurance to the aged, unemployed, indigent and ailing members of the Province.

Non-interference by the Finance Department in the functioning of Accountant General’s Office, in compilation and tabulation of the monthly civil accounts which lack details and clarity.

Budgetary exercise is an exercise in futility, if its implementation modalities remain ineffective.

Quarterly evaluation and monitoring of the budget and its placement before the Assembly by the Finance Minister for critical appreciation by the elected representatives before further funds are released both for development and non development expenditure.

MEASURES PROPOSED

Universally accepted principle that all taxable incomes are to be taxed and rationalized, we have proposed to rationalize the existing Sindh Land Tax and Agricultural Income Tax Ordinance No. XII of 2000 – Annexures B and C.

Reduction of the non-development revenue expenditure. Expenditure of Rs. 16,000 million on natural calamity and relief (2011-12) has been reduced to Rs. 5000. In case of an emergency additional funds be sanctioned outside budget.

The expenditure on Police has been increased to Rs. 35,956 million at the Current Expenditure level which includes Rs. 5000 million for the creation of a Provincial Intelligence Bureau under Home Secretary at Karachi and its regional offices at each District Headquarter.

Under the Capital Head, the funds utilized for Investment amounting to RS.13,300 million invested during current years ten months have been proposed to be withdrawn for the utilization on such projects/schemes that serve the poor and needy.

Rationalization and reduction of Sales Tax on Services from 16% to 12%.( No levy on Construction industry). Discriminatory rates under Valuation Table notified by the Superintendent Stamps be withdrawn.

Supply of Ata at Urban Centres (District Headquarters) at a subsidized rate of Rs. 750.00 per 40 kg on issuance of Ration Cards or through other mechanism (Utility stores have failed miserably to provide atta, sugar etc on subsidized rates to the genuine consumers) Subsidy of Rs.2,500 million to growers and Rs.2,000 million to city dweller consumers needs to be paid to achieve this target

Merger of Board of Revenue and Sindh Revenue Board under the overall supervision of the Finance Department.

Allocation of Rs.440 million (20 million to each 22 District Headquarters Hospitals and Rs.150 million for upgrading and provisioning the health services of Civil Hospital, Jinnah Hospital and other five Town Hospitals of Karachi and Rs.500 million for Taluka Hospitals, Rural Urban Health Centres and Basic Health Units for better health facilities.(Capital Development)

To provide additional funds for the Curative and Preventive Health Services, the allocation of Health Department has been increased from the actual Rs.15,400 million to Rs.23,700 million.

Capital Development Expenditure of Rs. 8,000 million for Education Department and Rs. 10,640 million for Health Services has been proposed.

Allocation of Rs. 5000 million for the infra-structure development of the 22 District Headquarters including Rs.1500 million for the City of Karachi.

Conversion of Sindh Commercial Bank into Micro Credit Bank having atleast 103 branches in each Taluka headquarter to cater the needs of the poor business persons, traders, craftsmen, haris, and so on.

Instead of planning a new City that will cost billion of rupees and that too for the benefit of the rich, the economic and social infra structure at all District Headquarters need to be improved with the assistance of town planners of the private sector.

Monitoring and Evaluation team for each District of very reputable honest citizens (including MPAs and elected members of the Local Government) for constant vigilance and monthly evaluation reports.

Simplification of the procedure for the release of funds to curb the red-tape has also been suggested and simplification of the format of monthly Civil Accounts, A.G. Sindh’s Office.

The proposed sectoral allocation for development is given at Annexure A. Before proposing the salient features of the proposed budget we have endeavored to review the past performance of the Government since 2003-04 to April 2012.

CIVIL ACCOUNTS

ACCOUNTANT GENERAL SINDH

In million rupees

Year VOTED AND CHARGED NON-DEVELOPMENT CAPITAL EXPENDITURE DEVELOPMENT EXPENDITURE DEVELOPMENT REVENUE EXPENDITURE
2003 18,110.60 4,621.00 2,780.70
2004 14,654.60 8,881.00 2,224.50
2005 6,457.50 20,624.60 2,702.40
2006 -5,159.10 23,966.90 2,578.10
2007 18,132.00 31,805.40 3,818.60
2008 15,731.90 40,566.30 4,694.10
2009 12,495.10 44,760.30 12,662.00
2010 31,105.20 51,949.70 14,985.90
2011 42,274.00 54,408.00 12,351.00

PROVINCIAL REVENUE RECEIPTS

AND EXPENDITURE

FY 2002-03 TO FY 2010-11

(ESTIMATES)

Rs. in million

FINANCIAL YEAR REVENUE RECEIPT REVENUE EXPENDITURE
2002-03 95,475.2 61,928.7
2003-04 90,694.2 95,740.5
2004-05 111,541.1 124,541.6
2005-06 137,868.1 142,665.7
2006-07 125,989.2 151,263.6
2007-08 154,246.9 173,474.5
2008-09 175,641.1 202,274.9
2009-10 220,270.6 241,547.1
2010-11 415,908.0 402,163.0
2011-12 18,986.0 427,456.0

Source: Pakistan Statistical Year Book 2010

Government of Pakistan,

Statistics Division,

Federal Bureau of Statistics and Federal Accounts 2011-12

FEDERAL TRANSFERS TO PROVINCIAL GOVERNMENT OF SINDH

From 2003-04 to 2010-11

Rs. in million

FY-04 FY 2005
2003-04 2004-05
BE Actual BE Actual
Revenue Assignment  41,817.59 38,133.33 47,628.59 46,454.70
Straight Transfer  24,081.83 25,611.83 25,049.86 27,704.36
Grants  10,871.00 7,871.32 10,747.47 9,803.39
Federal PSDP for Sindh  —- 6,980.61 11,496.26 9,045.00
Total 76,770.42 78,597.09 84,174.71 93,007.45

 

FY-06 FY -07
2005-06 2006-07
BE Actual BE Actual
Revenue Assignment  52,003.87 56,098.97 63,468.59 62,652.60
Straight Transfer  29,517.92 36,003.52 37,902.12 47,111.61
Grants  12,149.51 12,814.13 18,606.80 16,639.91
Federal PSDP for Sindh  9,474.02 8,367.02 10,574.20 11,225.64
Total 103,145.32 113,283.64 130,551.71 137,629.76

FEDERAL TRANSFERS TO PROVINCIAL GOVERNMENT OF SINDH

From 2003-04 to 2010-11

Rs. in million

FY-08 FY-09
2007-08 2008-09
BE Actual BE Actual
Revenue Assignment  81,717.05 77,143.35 103,036.61 76,912.53
Straight Transfer  42,054.65 41,776.47 40,796.14 42,032.24
Grants  27,526.49(GST 2.5%) 20,131.35 34,391.59 24,002.61
Federal PSDP for Sindh  14,381.05 12,328.00 12,707.80 10,692.00
Total 165,679.24 151,379.17 190,932.14 153,639.38

 

FY -10 FY-11
2009-10 2010-11
BE Actual BE Actual
Revenue Assignment  116,333.45(GST included) 114,632.86 207,274.64(GST included) 198,519.60
Straight Transfer  50,124.94 45,315.88 258,484.24 262,980.74
Grants  8,893.50 9,124.44 —-
Federal PSDP for Sindh 
OZT 2.5% short fall 27,590.57 28,414.23 5,572.35 5,663.06
Total 202,942.46 197,487.41 264,056.59 268,643.80

Source: Finance Department, Sindh.

YEAR  2008-09

BUDGET ESTIMATES AND ACTUAL (CIVIL ACCOUNT)

Rs. in million

Year BE Receipts Actual Receipts BE Expen-diture Actual Expen-diture
2008-09Final June 1.Tax  19,772  21,015  Non Dev. Rev. Exp. 180,987 177,993
2.Non Tax 10,480 6,426 Non Dev. Cap. Exp. 28,071 12,495
A. Total  30,252 27,441 Dev. Rev. Exp. 13,477 11,572
3.Divisible Pool   Federal 111,055 113,670 Dev. Cap. Exp. 41,523 47,,944
4.Straight Transfer 40,796 47,986 Grand Total 264,058 250,004
5.OZT 25,732 10,695
6.Grants 12,707 8,424
B. Total 190,292 180,775
C. Capital 14,495 21,357
Grand Total 235,069 229,573

Note:        Actual Receipt                   =        229,573

Actual Expenditure               =        250,004

Deficit                          =         20,431

YEAR  2009-10

BUDGET ESTIMATES AND ACTUAL (CIVIL ACCOUNT)

Rs. in million

Year BE Receipts Actual Receipts BE Expen-diture Actual Expen-diture
2009-10Final June 1.Tax  23,751  21,562  Non Dev. Rev. Exp. 213,398 189,177
2.Non Tax 15,349 14,220 Non Dev. Cap. Exp. 46,617 29,106
A. Total 39,100 35,782 Dev. Rev. Exp. 26,339 15,022
3.Divisible Pool Federal 125,227 85,665 Dev. Cap. Exp. 48,660 51,792
4.Straight Transfer 50,125 50,239 Grand Total 335,014 285,097
5.OZT 27,590 14,154
6.Dev/Non Dev. Grants 18,225 9,354
B. Total 221,167 159,412
C. Capital 21,323 36,282
Grand TotalA+B+C 281,580 231,476

A+B+C

Note:       Actual Receipt                     =        231,476

Actual Expenditure                 =        285,097

Deficit                            =         53,621

Public Account Net Minus                                                    15,651

YEAR  2010-11

BUDGET ESTIMATES AND ACTUAL (CIVIL ACCOUNT)

Rs. in million

Year BE Receipts Actual Receipts BE Expen-diture Actual Expen-diture
2010-11  Tax  31,500  21,562  Current Rev.      189,177Exp. Voted.
Non Tax 19,000 14,220 Current Rev.        29,106Charged.
GST Services 25,000 15,356 Total A=   218,283
A. Total 75,500 51,138 Non Dev. Rev. Exp. 268,267 Current Cap.        11,542Voted.
  Divisible PoolFederal 199,035 198,520 Non Dev. Cap. Exp. 18,989 Current Cap.        42,866Charged.
Straight Transfer 61,477 64,461 287,256 Total B =    54,408
Dev/Non Dev.Grants

Misc

5,350 5,663 

9,284

Dev. Rev.             12,351Dev. Cap.            42,274
B. Total 265,862 277,928 Dev. Exp. 60,380 Total C=    54,625
C. Capital 17,635 12,114 Capital Exp. 18,898
Grand TotalA+B+C 358,997 341,180 Grand Total A+B+C 367,278 327,316

Note:                                                                                                           Public Account

Actual Receipt                    =       341,180                                                Net                 1,404

Actual Expenditure                =       327,316

Deficit                           =        13,864

RECEIPTS – SUMMARY

Rs. in million

B.E.       10 Months

B.E.2011-12 10 MonthsActual July-April B.E.2012-13
I. FEDERAL TRANSFERSa)   Direct Taxes

b)   Indirect Taxes

c)   Straight Transfers

d)   Other Grants

 

98,416

153,445

53,445

6,771

65,988

117,553

40,549

9,807

105,000

185,000

65,000

15,000

TOTAL A+B+C+D 312,077 233,897 370,000
II.   PROVINCIAL RECEIPTSa)   Taxes on Services

b)   Other Tax Receipts

c)   Non Tax Receipts

 

25,000

35,044

19,862

18,835

29,108

10,590

23,000

61,000

15,000

TOTAL A+B+C 79,906 58,533 99,000
III.  CAPITAL RECEIPTSa)     General Receipts

b)     Foreign Project Assistance

c)     Development Grants

27,003

20,156

9,783

17,000

10,000

——–

Total A+B+C 56,942 7,860 27,000
Total I+II+III 448,925 300,290 496,000

NOTE: Total receipts excluding State Trading is 448,925

Note: Total receipts excluding State Trading is 496,000. It is 10.4% increase over B.E. 2011-12.

EXPENDITURE – SUMMARY

Rs. in million

B.E.2011-12 10 MonthsActual July-April B.E.2012-13

 

 

1. Current Rev. Expenditure  283,147 236,496 290,241
2. Current Cap. Expenditure 33,309 51,564 34,366 
3. Development Expenditure 141,090 37,830 160,000 
TOTAL 457,546 325,890 484,607

RECEIPTS – MAJOR HEADS

Rs. in million

B.E.2011-12 Actual2011-12

July-April

B.E.2012-13
A. Federal Transfers1.  Direct Tax/Income Tax

2.  Indirect Sales Tax,

Custom, Excise

3.  Straight Transfers

(Royalties, Gas, Dev.

Surcharges and Others.

4.  Grants

98,416

153,445

 

43,020

 

 

6,771

65,988

117,553

 

40,548

 

 

9,807

105,000

185,000

 

65,000

 

 

15,000

TOTAL 312,077 233,896 370,000
B. Provincial Receipts1.  Agricultural Income Tax

2.  Provincial Excise

3.  Stamp Duty

4.  Motor Vehicle

5. SD&M Infrastructure

6. Capital Value Tax

7.  Registration

8.  Fees on land Transaction

9.  Property Tax

10.  Professional Trade

11. Hotel Tax & Others

12. Forest, fisheries,

Livestock

500

3,000

6,000

4,000

15,000

2,700

1,300

450

-

300

1,794

-

67

1,870

3,722

2,595

16,611

1,820

778

142

956

229

357

-

11,500

2,300

4,460

3,120

20,780

2,220

1,000

170

1,150

373

427

13,500

TOTAL 35,044 29,147 61,000
C.  Non Tax Receipts1.  Extra-Ordinary

(Sale of land etc)

2.  Interest, Dividend

3.  Admn Deptt

(police, Education, Works

Forest etc.

4.  Misc.

6,000

 

2,973

3,054

 

 

7,835

3,981

 

2

2,424

 

 

4,283

6,000

 

-

4,000

 

 

5,000

TOTAL 19,862 10,690 15,000
D. Sales Tax on Services 25,000 18,835 23,000
E. Capital Receipts 56,942 7,861 27,000
TOTAL 448,925 300,429 496,000

EXPENDITURE – FUNCTIONWISE

Rs. in million

B.E.2011-12 10 MonthsJuly-April

2011-12

B.E.2012-13
CURRENT REV. EXP.1. Organs of State excluding Law Deptt

2. Law Department

3. Finance Department

4. Tax Management

5. Pension

6. Planning

7. Weights and Measures and Statistics

8. Publicity/Information

9. Admn. Training

10. Law Courts

11. Police & Jails, Civil Defence

Training Research.

12. Works & Services

13. Public Health

14. Town Planning

15. Community Services

16. Education

17. Health

18. Social Welfare

19. Agriculture & Food

20. Land Management

21. Forest, Fisheries and Animal Husbandry

22. Irrigation &

Land   Reclamation

23. Rural Development

24. Industries and Minerals Deptts

25. Transport

26. Subsidies

27. Debt Servicing(Interest Payments)

28. Grants & Subventions to Local Govt.

29. Other Departments & Misc

30. Natural Calamities

31. Unforseen

4,755

1,110

10,640

1,916

15,827

3,317

512

762

73

3,383

32,604

 

1,384

1,288

64

34

22,761

13,563

601

2,033

133

1,174

11,294

 

402

520

94

1.515

9,273

137,533

9

279

201

5,087

587

4,513

1,559

19,327

335

261

906

28

2,460

29,716

 

483

1,551

36

34

40,269

15,474

605

2,221

255

1,406

7,247

3,113

246

151

68

1,000

4,167

68,227

118

16,384

3,907

6,155

603

5,415

1,886

23,385

405

315

1,096

33

2,976

35,956

 

584

1,876

43

41

43,725

23,723

732

2,687

308

1,701

8,768

3,767

297

183

82

1,210

5,042

92,554

142

5000

19,551

TOTAL 283,147 231,741 290,241
CURRENT CAP.EXPENDITURE. 33,309 Non-Dev. Cap. Exp1. Debt (Non – Food)

2. Govt. Investment

3. Loans & Advances

7,908

13,300

690

28,066

5,300

1,000

TOTAL 33,309 21,898 34,366
DEVELOPMENTEXPENDITURE. 141,090 Development Exp.● Revenue Expenditure

● Capital Expenditure

5,657

37,830

16,000

144,000

TOTAL 141,090 43,487 160,000
GRAND TOTAL 457,546 297,126 484,607

Note: The Actual Expenditure of Education for 9 months was 29,764 which jumped to Rs. 40,269 in April 2012. The Actual Government Investment of Rs. 13,300 in April has been reduced to Rs. 5,300 in B.E. 2012-13.

Annexure “A”

DEVELOPMENT EXPENDITURE

2012-13

In million rupees

A. DEVELOPMENT REVENUE EXPENDITURE 16,000.00 10%
B. DEVELOPMENT CAPITAL EXPENDITURE 144,000.00 90%
TOTAL     A+B 160,000.00 100%

DETAILS OF DEVELOPMENT CAPITAL EXPENDITURE

1. Agriculture, Livestock, Fisheries and Forest 10,500.00 7.3%
2. Allocation Priority Program (MPAs) 3,360.00 2.3%
3. On going schemes 55,000.00 38.2%
4. District Development Grants 6,000.00 4.1%
5. Education 8,000.00 5.5%
6. Health 10,640.00 7.4%
7. Industries 3,000.00 2.8%
8. Infrastructure – Physical & Social Sector 5,000.00 3.4%
9. Irrigation – Small Dams 2,500.00 1.7%
10. Mines & Minerals 5,000.00 3.4%
11. Public Safety / Security 5,000.00 3.4%
12. Public Health Engineering (Drinking Water) 2,500.00 1.7%
13. Rural Development 5,000.00 3.4%
14. Science and Information Technology 5,000.00 3.4%
15. Social Welfare 5,000.00 3.4%
16. Water and Drainage 7,500.00 5.2%
17. Block Allocation 5,000.00 3.4%
TOTAL 144,000.00 100.0%

Annexure “B”

PRODUCTION OF AGRICULTURE SECTOR

PRODUCTION IN MILLIONS RATE PRICE IN MILLION RUPEES
A. MAJOR CROPS1. Wheat

2.  Sugar Cane

3.  Rice

4.  Cotton

3.54 Tons

13.30 –do-

2.53 –do-

2.69 –do-

26500

2025

1750

6882

93,810.00

26,982.00

44,275.00

18,512.00

Total Major Crops                          36% 183,579.00

 

B. MINOR CROPS                           9% 45,895.00
C. Livestock, Fisheries, Forestry   55% 280,467.00
GRAND TOTAL A+B+C 509,941.00

Source: Pakistan Statistical Year Book 2010.

Sindh Agricultural Income Tax Bill, 2012

Whereas it is expedient to provide imposition of tax on income from agriculture including livestock, fisheries and forestry in the Provincial of Sindh.

Whereas in order to meet the egalitarian expectations of the populace it is imperative that all taxable income be taxed:

It is hereby enacted as follows:

1. Short title, extent and commencement –

(1) This Act shall be called the Sindh Agricultural Income Tax Act, 2012.

(2) It extends to the whole of Sindh.

(3) It shall come into force at once.

2. Interpretation –

In this Act, unless there is anything repugnant in the subject or context, the words and expressions used but not so defined shall bear the same meaning as in the Federal Income Tax Ordinance, 2001.

3. Scope of tax –

1) There shall be charged, levied and paid a tax known as agricultural income tax on the agricultural income including income from livestock, fisheries and forestry.

2) The tax shall be charged and levied on agricultural income in the same manner and to the same extent as any other income which is chargeable under the Federal Income Tax Ordinance, 2001.

3) All the provisions of the Federal Income Tax Ordinance 2001, and the rules, notifications, circulars, circular letters, orders and instructions etc issued thereunder are construed to be adopted and shall be applicable mutatis mutandis to this Act.

4) Repeal:-

1) The Sindh Land Tax and Agricultural Income Tax Ordinance No XII of 2000 and all the subsequent Amendments dated 31st August 2001, May 2002 and 22nd June 2002 stand repealed.

2) Section 41 of the Federal Income Tax Ordinance 2001, shall be inapplicable for the purposes of this statute.

For more information, contact:
Muttahida Quami Movement (MQM)
NINE ZERO, 494/8 Azizabad, Federal B. Area
Karachi, Pakistan
Phone: ++92 21 3631 3690, ++92 21 36329131, ++92 21 36329900
Fax: ++92 21 36329955

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