ISLAMABAD: In an apparent attempt to pacify its key coalition partner in the federal government – Muttahida Qaumi Movement-Pakistan (MQM-P) – the Pakistan Tehreek-e-Insaf (PTI) is likely to review development shares for Karachi and Hyderabad considering MQM-P’s longstanding demands related to shares of the previous octroi/zila taxes, Pakistan Today learnt on Wednesday.
Apart from the shares for the two Sindh cities, the ruling party will also speed up implementation on the promised Karachi package that was announced after the general election for the development of megacities in Sindh, reliable sources informed this scribe.
In this connection, a government team comprising Defence Minister Pervez Khattak, PTI leader Jahangir Tareen and Adviser to the Prime Minister on Establishment Shahzad Arbab and Adviser to Prime Minister on Finance and Revenue Abdul Hafeez Shaikh recently held a meeting with a delegation of MQM-P leaders at the ministry in Islamabad. The MQM-P delegation comprised Federal Minister for Information Technology Khalid Maqbool Siddiqui, Aminul Haq, Amir Khan and Kanwar Naveed Jamil.
Both sides discussed the grievances of the Karachi based party regarding funding constraints of megacities which largely voted for the ruling party in 2018.
The meeting was held at a time when MQM-P has started sharing its concerns about the future of the government and debating benefits that it has so far gained in response to extending its support to PTI’s federal government.
It may be mentioned here that conflicting statements and remarks from other allies, including Pakistan Muslim League-Quaid (PML-Q) and Grand Democratic Alliance (GDA), have alarmed the ruling party which is already facing protests led by Jamiat Ulma-e-Islam-Fazl (JUI-F) with the support of other opposition parties.
Insiders claim that during the meeting that held a few days ago, MQM-P’s delegation was informed that the federal government would fulfil all its commitments regarding the Karachi package.
The party was also informed that supervision of Karachi Bus Rapid Transit Red Line project was shifted to Cabinet Division from the Ministry of Communication to speed up the process of execution.
During the meeting, MQM-P’s major demand regarding due shares of abolished municipal/city taxes including “octroi and zila” was also discussed in detail.
The Octroi and Zilla Tax (OZT) were used to apply to goods entering a city or zila. Local governments would thus earn revenue from taxing goods entering their cities but the tax was abolished in 1999 so, the central government decided to compensate for the loss by raising sales tax from 12.5 per cent to 15 per cent.
Afterwards, it was the provincial government’s responsibility to give Karachi and Hyderabad their due share as compensation of the old taxes. The Sindh government gives all of the province’s 23 districts money to pay for their ‘development’.
In Karachi, it has to give money to the Karachi Metropolitan Corporation (KMC) and the city’s smaller six district municipal corporations: Central, South, West, East, Korangi, Malir. Yet the local governments, mainly ruled by MQM-P, have always been crying over lack of resources/funding and due share from the provincial government.
The meeting at finance ministry was informed that after the abolition of the OZT a mechanism was chalked out for the provision of OZT Grant in the centre in 1999. The addition of 2.5 per cent or 1/6th of sales tax) was to be utilised to offset the losses on account of abolition of OZT. As per the same mechanism it was decided to transfer the entire proceeds of 1/6th of GST to provinces in 2000.
The MQM-P delegation was informed that around Rs20 were invested for over 20 federal government-funded projects in Karachi and Hyderabad during the past 10 years.
Interestingly, no provision was made in the 7th National Finance Commission (NFC) Award regarding the similar mechanism and under the NFC all provinces were to finance the local governments out of their share in the divisible pool taxes.
In the case of Sindh, it was provided that an additional grant from the federal government equivalent to 0.66 per cent of a provincial share shall be provided.
According to sources in the finance ministry, over Rs450 billion were transferred to Sindh under the distribution mechanisms since the abolition of OZT in 1999 to 2018-19.
Furthermore, finance ministry officials also assured MQM-P leaders that the issue would be reviewed and meet reservations of the local government in Sindh.
While concluding, it was decided that MQM-P’s demands would also be taken up at the highest forums and discussed with Prime Minister Imran Khan.