With the constitution of the present National Finance Commission, the earlier N.F.C. stand dissolved with immediate effect.

Jul 31 - Aug 06, 2000

Yet another manifestation of General Pervez Musharraf's anxiety to address the smaller provinces concern was available when he announced reconstitution of National Finance Commission to review the award 2 years ahead of schedule in view of demand of the smaller provinces of Balochistan and N.W.F.P.

A few days back Gen. Musharraf had announced at Quetta that less developed areas in the country will get additional funds for their development programme. Every area in the country will get its genuine right but the less developed areas will get extra funds from development funds and these will be spent on their development schemes", he declared while speaking at the inauguration of Rs. 1.5 billion (through federal government special grant) power plant which will provide 39 megawatts electricity power for the Mekran Division. Mekran was badly neglected in the past which has created a sense of deprivation among the people of this area. With this project and some other projects coming up in the area this feeling will be eliminated" he added also announcing the postponement of Agriculture income tax from the farmers of Balochistan for one year in addition to charging the old flat power rates for this period. He however, said that government could not extend such relief for ever as it also needed money for the development of the country and welfare of the people. He also indicated that his government was alive to the demand of the smaller provinces to review the NFC.


A few days later President Rafiq Tarar, constituted an 11-member National Finance Commission with the finance minister as its head to make recommendations, among other things, regarding distribution of taxes between the federal government and the provinces.

Besides recommending the distribution of net proceeds of various government taxes, the commission will determine the ratio in which the distribution is to be made. According to sources, the new taxes to be included for distribution are GST and sales tax on services. The commission, which was set up during Farooq Leghari's caretaker regime, stands dissolved with the setting up of the new commission.

In the previous commission, the share of the provinces was considerably reduced and the federal government's share was enhanced to 72.5 per cent, while 37.5 per cent was distributed among the provinces on population basis. The new commission will consider the distribution of sales tax and tax on services as part of the federal pool.

Besides the commission would also consider the inclusion of other federal taxes including customs duties and federal excises and deliberate on the issue of grants-in-aid to the provincial governments.

A press release issued on Saturday night reads; the President in pursuance of the Constitution of the Islamic Republic of Pakistan has constituted the National Finance Commission (NFC). The Finance Commission consists of the following namely.

Minister for Finance, Government of Pakistan. Chairman, Minister for Finance government of Punjab. Member, Minister for Finance government of Sindh. Member, Minister for Finance government of N.W.F.P. Member, Minister for Finance, government of Balochistan Member, One member from each provinces to be notified in consultation with the governors of the provinces; Members Secretary General Finance government of Pakistan, Finance Secretary, government of Pakistan Official Expert.

The terms of reference (TRO) for the commission are:

A. The distribution between the Federation and the Provinces of the net proceeds of the following taxes:

i) Taxes on incomes including corporation tax but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Funds.

ii) Taxes on the sales and purchases of goods, imported, exported, produced, manufactured or consumed.

iii) GST on services;

iv) Consider the inclusion of other Federal Taxes including Customs Duties and Federal Excises, but not including taxes on income paid of Federal Consolidated Funds.

B. The making of grant-in-aid by the Federal government to the Provincial governments.

C. The exercise by the Federal government and the Provincial government of the borrowing powers conferred by the constitution.

D. Examine the question of rationalization of payment of royalties on crude oil, one of surcharge of natural gas collected by the Federal government to the Provincial governments.

E. To consider review of the distribution of share of taxes between fiscal discipline at the Federal and Provincial levels and for ensuring consistency in maintaining an appropriate fiscal balance at the consolidated level.

F. Any other matter relating to finance referred to the commission by the President.

With the constitution of the present National Finance Commission, the earlier N.F.C. stand dissolved with immediate effect.