Provincial Tax Reforms Chapter 10: Provincial Tax Reforms 10.1. The Provincial Tax System According to the allocation of fiscal powers in the Constitution the Provincial Governments have been given taxes on the bases of exclusion and residual powers not assigned to the Federation. The two taxes partitioned out are the sales tax on services versus the tax on goods and agricultural income tax out of the overall income tax. Other major Provincial taxes are land revenue, urban immoveable property tax, motor vehicle tax, entertainment tax, electricity duty and the tax on professions, trades, and callings. The stamp duty is not charged under a fiscal statute but for documentation of transactions. The level of and trend in Provincial tax revenues is given in Table 10.1. Following the 7 th NFC Award which granted the Provinces the right to levy the sales tax on services there is a visible enhancement in the growth rate. In 2018-19, the Provincial tax-to-GDP ratio crossed 1 percent of the GDP. However, there still exists considerable potential for making Provincial taxes yield more revenues in a progressive manner. Table 10.1: Trend in Provincial Revenues 2004-05 2009-10 Four Provinces Combined 35 55 Punjab 20 30 Sindh 12 22 Khyber-Pakhtunkhwa 2 2 Balochistan 1 1 Total Revenues as% of GDP 0.5 0.4 (R.E)= Revised Estimates. Source : MOF, Fiscal Operations 2014-15 206 98 194 11 3 0.7 2018-19 402 193 178 20 11 1.0 (Rs in Billion) 2020-21 (R.E) Share (%) 508 100.0 227 44.7 230 45.3 33 6.5 18 3.5 1.1 Table 10.1 also reveals that the two bigger Provinces, Punjab, and Sindh, with higher per capita income, collect the bulk of Provincial tax revenues. Further, according to Table 10.2, the largest Provincial tax is the sales tax on services with a share of 52 percent and bulk of the revenue is from indirect taxes. Taxes like the agricultural income tax and the urban immoveable property tax currently yield only minor revenues. The focus in the Provincial tax reforms is primarily on these three taxes. 107