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rger population, while the smallest and more backward province Khyber Pakhtunkhwa has gained the least. This regional inequity occurred due to the negligence of other important factors in the resource distribution formula, like poverty, backwardness, education, revenue generated capacity, development etc. This disparity among provinces created a resentment against the government.

 

Divisible Pool

 

The most important instrument of fiscal transfer between Federal and provincial government is the size of divisible pool. There are two major questions arise when we discuss the size of the divisible pool. First, what tax and non-tax revenues should be a part of the divisible pool? Secondly, how these revenues should be distributed between the two levels of government? Provincial share in the divisible pool is determined by the amount of revenues left after federal government meets its own expenses, particularly defense expenditure and debt servicing. As far as the first question is concerned, all those taxes which fall under the fiscal powers of the two tiers of government should be included in the divisible pool.

 

4. CONCLUSIONS AND RECOMMENDATIONS

 

The main objective of this paper was to archeologically analyze the intergovernmental resource transfer mechanism and trend in Pakistan and its related issues. The matter of resource transfer from federal to provincial level has never been simple and trouble-free, rather it is a more complex matter. If we look at the history, we find that no serious approach has been taken by our policy makers to resolve the long-ignored issue of resource distribution. Because all the time provinces were busy in bargaining over the share of resource pie, and due to non-consensus, either by will or force, the commission remained stuck to the same old population criteria which is not ideal. That is the reason National finance Commission has not been very successful in achieving fiscal decentralization. In the times of disagreements among the stakeholders, interim awards were given out which benefitted the larger province.

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