Karnataka Chief Minister Siddaramaiah has written a letter to the Chief Ministers of eight states regarding the unfair devolution of taxes by the Union government.
CM Siddaramaiah also said that he has extended an invitation to the Chief Ministers of eight states for a conclave in Bengaluru to collectively deliberate on the issues of fiscal federalism at a juncture when the Finance Commission needs to make a directional shift & create incentives for growth & better tax mobilisation.
He said that States with higher GSDP per capita, like Karnataka and others, are being penalized for their economic performance, receiving disproportionately lower tax allocations. This unjust approach undermines the spirit of cooperative federalism and threatens the financial autonomy of progressive states.
“As you are aware the 16th Finance Commission has begun its deliberations. The previous Finance Commissions have laid excessive emphasis on equity at the cost of efficiency and performance. As a result, states with higher GSDP per capita and higher contribution to the gross tax revenues of the union are progressively receiving lower shares of the central fiscal transfers,” the Chief Minister said in the letter.
CM Siddaramaiah stated in his letter, during the visit of the 16th Finance Commission to the State of Karnataka, during 29-30, August 2024, I have underscored the need to carefully examine the impact of high emphasis given to equity on resource devolution to well performing states. I have emphasised that the reduction in central financial transfers to well performing States is placing severe limitations on their ability to invest in physical and human infrastructure.
“The taxpayers of states, which are net donors to the divisible pool, also expect a fair share of their taxes to come back to them. The Finance Commission therefore needs to carefully balance equity with efficiency and performance,” the letter reads.
States with strong contribution to the country’s GDP and Gross Tax Revenue, help build the nation in more ways than one. Therefore, there is an urgent need to balance equity with efficiency and performance for a stronger Union, both politically and economically. It is, therefore, important that states which are receiving smaller shares in horizontal devolution, compared to their contributions to the Gross Tax Revenues of Union, need to articulate a coordinated set of proposals before the Commission, CM Siddaramaiah stated in his letter.
Meanwhile, a one-day conclave of finance ministers from five states is being held in Thiruvananthipuram on Thursday to discuss issues related to the 16th Finance Commission. Kerala Chief Minister Pinarayi Vijayan inaugurated the event, with Finance Minister K.N. Balagopal presiding.
Prominent figures, including Telangana Deputy Chief Minister and Finance Minister Bhatti Vikramarka Mallu, Karnataka Revenue Minister Krishna Byre Gowda, Punjab Finance Minister Harpal Singh Cheema, Tamil Nadu Finance Minister Thangam Thennarasu, will participate in the conclave.
