Share of central taxes to states should be hiked to 50%: Stalin
The meeting was held between the state government and the 16th finance commission chairperson Arvind Panagariya and its other members at the state secretariat
The Union government’s share of central taxes to states should be increased to 50% to ensure greater fiscal autonomy, chief minister MK Stalin said during a meeting with the 16th finance commission members in Chennai on Monday.
The meeting was held between the state government and the 16th finance commission chairperson Arvind Panagariya and its other members at the state secretariat.
Stalin called for the commission’s attention to address three financial challenges that plague Tamil Nadu with connection to natural disasters, a fast ageing population and urbanisation.
“We hope that the Commission will remedy past injustices and lay a road map for a true cooperative federalism,” Stalin said. “I hope that the Commission will make recommendations that will address the needs and aspirations of all states in India and enable the country to become an economic powerhouse of the world.”
While states have the responsibility to execute important schemes, the state governments have limited revenue generating powers, Stalin said, adding that his appreciation for the 15th finance commission recommending a 41% of the Centre’s divisible tax pool be transferred to states. “But, contradicting this, in the last four years, the devolution to states by the Union government has only been 33.16%,” Stalin said. “The financial strain has been particularly severe in states like Tamil Nadu where there is an increase in the share of funding by states for projects that are jointly implemented with the Centre. So, we believe that a fair and equitable share for states will be to increase the devolution of central taxes to 50%.”
The DMK-ruled Tamil Nadu has been advocating for greater fiscal autonomy and Stalin on Monday reiterated the need for cooperative and competitive federalism. “Tamil Nadu is at the forefront of implementing several schemes and good governance, and it is like we are being penalised for our good work,” said Stalin.
“While it is necessary to redistribute support to less developed regions, it is equally important that well-performing states also receive adequate resources to sustain and accelerate our progress. Reducing share of the divisive pool of taxes to well-performing states will not just hurt the growth of the country, but will also reduce the final share for poorer states,” he said.
Stalin also drew the commission’s attention to the three financial challenges faced by Tamil Nadu. Natural disasters, a fast ageing population, and urbanisation are concerns that require more funding from the state, the chief minister said.
“Natural disasters in the past few years have led to loss of life, livelihood and infrastructure. Huge funds are required for the state government to restore damage caused due to natural calamities, creating a situation where we are not able to fully allocate funds required for regular development and welfare projects,” Stalin said. “I request the commission to provide adequate resources for the state to bear the expenditure for mitigation, relief and restoration towards disaster management.”
The fast-ageing population is causing a shift in the demographic profile of Tamil Nadu. “At present, the median age in Tamil Nadu’s population is 36.4 years, which is 9.5 years older than that of Uttar Pradesh,” Stalin said.
“By the end of the term of the 16th finance commission, this median age in Tami Nadu will increase to 38.5 years making Tamil Nadu the state with the oldest population in India. The state has to significantly invest its economy in the next 10 years towards the needs of the elderly population,” he added.
Thirdly, the state is experiencing increasing urbanisation. “Raising funds for creating quality urban infrastructure is a complex challenge,” said Stalin, requesting more funds for the urban local bodies. “Following the implementation of GST, states are facing plenty of obstruction in raising resources.”
