The Determinants of Rates of Octroi Tax in Pakistan

Octroi is a tax imposed by local governments in Pakistan on commodities imported into the municipal limits for local use, sale, or consumption. It is levied generally by urban local councils on goods coming in by all modes-sea, land, and air transport. The point of assessment is alongside roads at octroi posts situated at or before municipal boundaries, at railway stations, seaports or airports. Octroi is currently the largest source of revenue to urban local councils in the country and contributes 86 percent to total tax revenues and over 59 percent to total local revenue receipts (see Table I). Its revenue significance (in terms of share in total receipts) has increased over the years. In 1987-88, it accounted for about 57 percent of total local receipts. Also, revenue generation from octroi is higher than that by any provincial tax. In 1991-92, total national collection from octroi was Rs 5.5 billion as compared to Rs 3.5 billion from stamp duties, the largest provincial tax source

Dynamic Budgetary Consequences of the 1991 NFC Award

The National Finance Commission (NFC) award of 1991 has been acclaimed to be a historic achievement of the previous elected government. It has come after a gap of many years (due since 1979) and some abortive attempts earlier.! Meanwhile, the provinces had run into large, chronic deficits on the current account, indicating the growing inadequacy of divisible pool transfers as per the provisions of the 1974 award. Consequently, as an ad hoc provision, deficit grants and other subventions had been used increasingly to support the on-going operations of the provinces. At their peak in 1987-88, these grants were Rs 17 billion (see Table 1), equivalent to about 2 percent of the Gross Domestic Product (GDP) and financed over one-fourths of the provincial current expenditure. Also, the federal government took over the responsibility of provision of some provincial responsibilities as contained in the Concurrent List of the Constitution like SCARPS, flood control, fertiliser subsidy, universities, etc