Taxpayers expect taxes to work for them, Siddaramaiah tells finance commission; CM cautions against skewed weightage to equity
Siddaramaiah on Thursday urged the 16th Finance Commission to cap cess and surcharge at 5% of gross tax revenue and move collections above that into the divisible pool for sharing with the states.
Cess and surcharge are not part of the divisible pool. Over the years the union government has increased its reliance on cess and surcharge. This has caused substantial loss to all the states. The loss to Karnataka on account of the non-sharing of cess and surcharge was Rs. 53,359 crore during the five-year period from 2017, the CM said, addressing Chairman Arvind Panagariya and other visiting members of the Commission.
The CM pressed for vertical devolution to states to be at least half of the divisible pool. All non-tax revenues of the Centre too should be included in the divisible pool. “Economically advanced states are committed to supporting poorer states, but this should not come at the expense of their own residents or economic efficiency. A larger proportion of resources generated by the states should be shared with them.”
The Finance Commission, Siddaramaiah said, must examine the impact of extremely high emphasis given to equity on the incentives of well performing states. “The taxpayers of such states expect their taxes to work for them. This creates public trust. The Finance Commission therefore needs to do a tightrope walk while balancing equity with efficiency and performance.”
Karnataka has been central to India's growth story. It contributes approximately 8.4% to the national GDP with only about 5% of
