Abstract
This paper argues for a paradigm shift in assignment of tax bases. The decentralization of tax bases currently assigned to the federal government will increase the net revenue collected at the national level. The decentralization of tax bases will reduce the magnitude of transfers from the federal government to the provinces however transfers cannot be done away with altogether. Transfers from the federal government to the provinces are undertaken through the National Finance Commission which is constituted every five years decide upon the distribution of national financial resources among the center and the provinces and among the provinces. The NFC has faced deadlock several times during the past 65 years. To take care of the deadlock over distribution of national financial resources, this paper first offers an alternate institutional mechanism to make a decision on a resource distribution.
