Description:
<jats:p>It is generally believed that the 7th National Finance
Commission (NFC) Award and 18th Constitutional Amendment have taken a
major step towards much needed fiscal decentralisation. While these two
delegate more fiscal autonomy and transfers additional resources towards
provinces, it seems difficult that tax decentralisation options provided
in these two can practically be implemented. This assertion is based on
historical tax decentralisation debate in Pakistan, which has made it a
very complex issue in management of public finances. There are arguments
both in favour and against tax decentralisation in Pakistan. Its
proponents argue that tax decentralisation is an important principle of
governance. They generally propose three advantages of fiscal
decentralisation including; preference-matching, efficiency through
competition, and increased accountability. In particular, a rational
assignment of taxing powers helps providing each level of government, a
control over its fiscal destiny by allowing it the choice in the level
of spending. It helps assuring taxpayers that they are getting what they
paid for and consequently may stimulate participation and
improve/increase accountability. According to Bahl (1999), fiscal
decentralisation assists in revenue mobilisation, innovation in economic
activity, accountability of elected officials and grassroots
participation in governance. Given this, it is probable that fiscal
decentralisation lead towards improved efficiency in the use of
resources as the residents in the sub-national governments can decide
about their desired mix of public services and revenues that best suits
them.</jats:p>