CHENNAI: The Tamil Nadu Assembly on Friday unanimously adopted a resolution, moved by Finance Minister N Marie Wilson, urging the union government to ensure that the state receives its due share of financial devolution from the taxes contributed to the centre, in accordance with the constitutional principles of fiscal federalism, equity and fairness.
The House also called for a transparent, objective and equitable methodology for the devolution of central taxes that duly recognises the contribution, fiscal effort, governance performance and developmental needs of the states, while safeguarding Tamil Nadu’s legitimate financial interests.
It further urged the union government to ensure that the criteria adopted for tax devolution do not place any state at a comparative disadvantage on account of its achievements in population stabilisation and human development.
Explaining the need for the resolution, the finance minister said Tamil Nadu, despite accounting for only about 6% of India’s population, contributed more than 9% to the country’s GDP through sustained investments in manufacturing, exports, education, healthcare, infrastructure and social welfare.
The minister said the TN government had consistently urged successive Finance Commissions to give due weightage to states’ economic contribution, fiscal effort, quality of governance, population control performance, and development needs while determining tax devolution.
However, Tamil Nadu’s share (tax devolution) under the 15th Finance Commission stood at 4.079%, rising only marginally to 4.097% under the 16th Finance Commission, which is a matter of concern.
Stating that the resolution does not seek any special concession, the minister said it reiterates that TN should receive its rightful share of funds in accordance with the constitutional principles of fiscal federalism.
Welcoming the resolution, former finance minister Thangam Thennarasu (DMK) proposed an amendment to the resolution.
He said the resolution should explicitly incorporate the demand for a 50% share of the divisible tax pool for the states, reflecting the position already placed by the TN government before the 16th Finance Commission. The present resolution is couched in very general terms, he added.
Under the 16th Finance Commission, the states’ share in the divisible pool of central taxes (vertical devolution) is set at 41%.
Welcoming the resolution, AIADMK general secretary Edappadi K Palaniswami said Tamil Nadu’s share in central tax devolution has been declining since the 12th Finance Commission.
And that’s because of changes in the devolution criteria, including the adoption of income distance, the inclusion of factors such as forest cover that disadvantaged the state, and the shift away from the 1971 Census, he pointed out. As a result, Tamil Nadu’s share of central taxes has fallen despite its success in population stabilisation, he said.