• Invites legal opinion on whether provinces are bound by federal expenditure priorities
• Seven working groups to be formed; second meeting to be held between January 8 and 15

ISLAMABAD: Building the case on overburdening and rising debt servicing costs post-2010, the federal government on Thursday proposed mobilising additional consolidated revenues amounting to more than five per cent of GDP over the next three years (roughly Rs6.5 trillion per annum at the current exchange rate).

The suggestion came during the much-delayed inaugural meeting of the 11th National Finance Commission (NFC), which also sought legal opinion on whether provinces are bound by federal expenditure priorities.

The Centre urged the Federal Board of Revenue (FBR) to increase the tax-to-GDP ratio by 3 to 3.5 percentage points from around 10pc at present in three years and asked the provinces to enhance their share of revenues to 3pc of GDP — through taxes on property, agriculture income and sales tax on services — from the existing 0.28pc.

It argued that the measure was necessary to stabilise the rising fiscal deficit, which had gone up from close to 4pc to over 6.6pc now after the fiscal imbalance created since 2010 under the 7th NFC award, resulting in massive deterioration of the debt-to-GDP ratio.

The meeting, held over an official lunch in a “very good atmosphere”, was chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb and was attended by the chief ministers of Sindh and Khyber Pakhtunkhwa (both holding the finance minister portfolio), finance ministers of Punjab and Balochistan, four provincial non-statutory NFC members, KP chief minister’s adviser Muzammil Aslam, and federal and provincial finance secretaries.

Participants........

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