Assignment of a tax means transfer of taxation power from a higher level to a lower level government. Taxation power includes right to levy tax, collect tax and appropriate the proceeds from such tax. Thus, there can be three interpretations of assignment of a tax. Firstly, higher-level government may levy and collect a tax but handover the entire proceeds to lower level governments. Secondly, the higher-level government may levy a tax but allow the lower level governments to collect it and retain fully the proceeds there from. Finally, the higher-level government may transfer a tax to lower level governments, a situation which defines assignment of a tax in its strictest sense. Generally, the purpose of tax assignment is to augment the resources of lower level governments. The assignment of tax may be conditional. Thus, it may be obligatory on the part of a lower level government to levy tax assigned to it. Not only this, the lower level government may not have powers to alter the basic structure of the assigned tax. It may enjoy flexibility in fixing tax rates within a minimum and maximum range prescribed by the higher-level government. Our tragedy is that on the one hand we have too many taxes in the country (federal, provincial and local) and on the other the benefit of revenue collection is not reaching the poor masses. Fiscal gap is increasing every year despite foreign donors’ bitter prescriptions bringing more miseries for the common people of Pakistan. We have utterly failed to reform our tax system, a process initiated as early as 1990s. The existing tax policies have failed to reduce the fiscal deficit. In fact, these are destroying our industry and business and pushing a large segment of society below the poverty line. We have been unsuccessful in undertaking fundamental structural reforms in taxation. The emphasis of every government has been on achieving targets and that too through coercive measures. Therefore we could neither progress economically nor get rid of ever increasing debts. For achieving the cherished goal of self-reliance through growth we need to think innovatively. Resource mobilisation, not through taxes alone but generating non-tax revenues, to overcome perpetual dependence on loans is not possible without a fair and just system that requires institutional reforms. So long as the elitist structures exist and Raj-days bureaucracy/revenuecracy controls the State, Pakistan will remain in debt enslavement. If we want to come out of this state of affairs, the Parliament will have to revisit the prevailing social contract between federation and the provinces. Provincial autonomy and local self-governance without taxation rights and equitable distribution of income and wealth is meaningless. We cannot overcome perpetual economic and political crises unless the provinces and local governments are given sufficient resources and rights to generate own revenues to be utilised exclusively for the welfare of the residents who pay the same. Economic equality, prosperity, peace and social tranquility can never be achieved unless we dismantle the existing elitist structures completely and empower the elected institutions at grassroots level Pakistan is in dire need of fiscal decentralisation. Fiscal decentralisation involves the transfer of taxing and spending powers to sub-national levels of government. In our case, local governments that are still not empowered as envisaged in Article 140A of the Constitution. Fiscal decentralisation and local self-rule should essentially be linked with a social policy based on the principle of universal entitlements for all residents in terms of access to social benefits and social services. For example, municipalities in Finland enjoy complete fiscal independence through their elected residents. These municipalities have the right to levy municipal tax in accordance with the Local Government Act 1995. Local authorities perform the functions that they are responsible for by virtue of their autonomy and as required by law. This type of governance is totally missing in our democracy. One of the central principles regarding municipal self-governance in Finland is that, when allocating new functions to municipalities, the State has also to ensure that they have the necessary resources to carry them out. Finland has a well-functioning relationship between the State and the local authorities, as well as a state-subsidy system which ensures municipal resources and residents’ equal access to services. We can learn from this model. It can change the fate of entire country. We have resources but system for self-governance as in vogue in Finland and elsewhere is non-existent. Resultantly, power vests with the privileged classes instead of the people. Like Finland, we must move to welfare state model, largely based on the idea of the municipalities being the producers and providers of services. In Finland, extensive functions that fall within the specific sphere of authority include education, health care and social welfare services. Furthermore, the municipalities are responsible for matters related to the residents’ free-time, recreation, housing, and management and maintenance of their living environment (i.e. roads, streets, water supply and sewerage), as well as land-use planning and functional municipal structures. Tax revenues have a critical role in municipal finances. The power to levy and collect taxes is one of the cornerstones of municipal self-governance as it ensures that the municipalities can manage the functions that they have undertaken to execute or which they are responsible for by law. For achieving the goal of fiscal decentralisation, financial resources for local governments must commensurate with the responsibilities to ensure welfare of the people and sustainable growth at grassroots level. Part of the financial resources of local authorities could be derived from local taxes and spent for providing universal entitlements and development. There is no other was to become a welfare state. Taxes must be collected and/or assigned at grassroots level to make certain that all the citizens get fundamental needs with respect and dignity. The present governments at federal and provincial levels, if really committed to make Pakistan a welfare state, must implement Article 140A in letter and spirit. Economic equality, prosperity, peace and social tranquility can never be achieved unless we dismantle the existing elitist structures completely and empower the elected institutions at grassroots level. We need political, fiscal and administrative decentralization where taxes are collected for education, health care and social welfare services through local governments working on the principle of self-governance-utilising the funds for the benefit of entire population. The writer, Advocate Supreme Court of Pakistan, is Adjunct Faculty at Lahore University of Management Sciences (LUMS)