نبذة مختصرة : This paper proposes an updated formula for resource distribution between provinces -- horizontal distribution -- under the upcoming National Finance Commission (NFC) Award. We maintain that the formula offered in the 7th NFC Award was predominantly needs-based and whatsoever equity indicators it has, by its very structure, fall short of capturing the full essence of equity. Further, we argue that existing indicators of efficiency – that is the size of provincial tax revenue, is not adjusted for the size of the provincial economy and, thus, fails to capture the efficiency part of tax collection -- that is, the effort made in this regard. Accordingly, we suggest some solutions which include i) adjustment in the weights of respective indicators, ii) alternative composition of existing indicators, and iii) inclusion of new indicators. The underlying idea for the choice of new indicators is a gradual shift from a needs-based approach to an efficiency-based resource distribution. Based on existing literature on the issue and the regional consultations, we also identify major challenges that need to be overcome in order to end the deadlock on NFC negotiations at the official level.
Processing Request
No Comments.