Article 160 of Constitution of Pakistan – National Finance Commission

Overview of Article 160 of the Constitution of Pakistan

The Constitution of Pakistan, crafted in 1973, serves as the foundational document shaping the nation’s governance. Within its pages lies Article 160, a crucial provision establishing the National Finance Commission (NFC). This article delineates the mechanisms governing the distribution of financial resources between the Federal Government and the Provincial Governments. Let’s embark on a journey to decipher the intricacies of Article 160 and its profound implications.

Article 160 States

160. National Finance Commission

• Within six months of the commencing day and thereafter at intervals not exceeding five years, the President shall constitute a National Finance Commission consisting of the Minister of Finance of the Federal Government, the Ministers of Finance of the Provincial Governments, and such other persons as may be appointed by the President after consultation with the Governors of the Provinces.
• It shall be the duty of the National Finance Commission to make recommendations to the President as to-
  • the distribution between the.Federation and the Provinces of the net proceeds of the taxes mentioned in clause (3);
  • the making of grants-in-aid by the Federal Government to the Provincial Governments;
  • the exercise by the Federal Government and the Provincial Governments of the borrowing powers conferred by the Constitution; and
  • any other matter relating to finance referred to the Commission by the President.
• The taxes refer red to in paragraph (a) of clause (2) are the following taxes raised under the authority of Majlis-e-Shoora (Parliament), namely: –
  • taxes on income, including corporation tax, but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Fund;
  • taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed;
  • export duties on cotton, and such other export duties as may be specified by the President;
  • such duties of exercise as may be specified by the President; and
  • such other taxes as may be specified by the President.
• The share of the Provinces in each Award of National Finance Commission shall not be less than the share given to the Provinces in the previous Award.
• The Federal Finance Minister and Provincial Finance Ministers shall monitor the implementation of the Award biannaully and lay their reports before both Houses of Majlis-e-Shoora (Parliament) and Provincial Assemblies.
• As soon as may be after receiving the recommendation, of the National Finance Commission, the President shall, by Order, specify, in accordance with the recommendations of the Commission under paragraph (a) of clause (2), the share of the net proceeds of the taxes mentioned in clause (3) which is to be allocated to each Province, and that share shall be paid to the Government of the Province concerned, and, notwithstanding the provision of Article 78 shall not form part of the Federal Consolidated Fund.
• The recommendations of the National Finance Commission, together with an explanatory memorandum as to the action taken thereon, shall be laid before both Houses and the Provincial Assemblies.
• At any time before an Order under clause (4) is made, the President may, by Order, make such amendments or modifications in the law relating to the distribution of revenues between the Federal Government and the Provincial Governments as he may deem necessary or expedient.
• The President may, by Order, make grants-in-aid of the revenues of the Provinces in need of assistance and such grants shall be charged upon the Federal Consolidated Fund.

Key Points of Article 160 of the Constitution of Pakistan

1. Composition of the National Finance Commission: The composition of the NFC reflects a concerted effort to ensure representation from both the federal and provincial echelons of the government. This inclusivity aims to foster comprehensive discussions on financial matters.
2. Duties of the Commission: The NFC’s responsibilities encompass recommending the distribution of net proceeds of specified taxes, suggesting grants-in-aid from the Federal Government to Provincial Governments, overseeing borrowing powers, and addressing other financial issues referred by the President.
3. Specified Taxes: Article 160 identifies taxes, including income taxes, sales and purchase taxes, export duties, duties of exercise, and other taxes specified by the President, as the focus of distribution between the Federation and the Provinces.
4. Minimum Share for Provinces: A notable provision ensures that the share of Provinces in each NFC Award is not less than the share allocated in the previous Award. This safeguards against disproportionate fiscal imbalances.
5. Monitoring and Reporting: A robust system is established for monitoring the implementation of NFC Awards. The Federal Finance Minister and Provincial Finance Ministers biannually present reports to both Houses of Parliament and Provincial Assemblies, enhancing transparency and accountability.
6. Implementation of Recommendations: Upon receiving NFC recommendations, the President, by Order, specifies the share of tax proceeds for each Province, ensuring it does not form part of the Federal Consolidated Fund. This underscores the autonomy and financial independence of Provincial Governments.
7. Amendments or Modifications: Flexibility is inherent in Article 160, allowing the President, by Order, to make amendments or modifications in the law relating to revenue distribution, thereby addressing evolving fiscal needs.
8. Grants-in-Aid: To assist Provinces facing financial challenges, the President can issue Orders for grants-in-aid charged upon the Federal Consolidated Fund, demonstrating a commitment to equitable development.

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Crux of Article 160 of the Constitution of Pakistan

Article 160 stands as a linchpin in Pakistan’s constitutional framework, embodying principles of federalism, equity, and financial autonomy. By establishing the National Finance Commission, it ensures a collaborative approach in addressing fiscal matters, fostering harmony between the central and provincial entities.

The crux lies in its meticulous balance—balancing the powers of the federal and provincial governments, balancing the distribution of tax proceeds, and most importantly, balancing the economic development of the entire nation. It serves as a testament to the framers’ foresight, recognizing the dynamic nature of financial requirements and allowing for adaptability.

Conclusion: Article 160 of the Constitution of Pakistan

In conclusion, Article 160 of the Constitution of Pakistan emerges as a cornerstone of fiscal governance, embodying the spirit of cooperative federalism. Its provisions, from the composition of the NFC to the implementation of recommendations, reflect a nuanced understanding of the financial needs of a diverse nation. As Pakistan navigates the complexities of economic development, Article 160 stands firm, guiding the nation towards equitable prosperity.

In essence, Article 160 encapsulates the constitutional commitment to ensuring that the benefits of economic progress reach every corner of Pakistan, fostering a united, resilient, and financially robust nation.

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