TN treated unfairly by the 14th Finance Commission

Tamil Nadu today said it has been treated "unfairly" by the 14th Finance Commission with a "drastic cut" in the horizontal tax share and urged the Centre to leave indirect taxation to states.
"Tamil Nadu has been unfairly treated by the Fourteenth Finance Commission with a drastic cut in the horizontal share from 4.969 per cent to 4.023 per cent of the general shareable tax pool and from 5.047 per cent to 4.104 per cent of the service tax pool," Chief Minister O Panneerselvam said.
Presenting the state budget for 2015-16, he said the criteria adopted by the Commission were "neither fair nor progressive" as efficiency and fiscal discipline have been totally ignored to the detriment of a "well-administered" state like Tamil Nadu.

"A state like Tamil Nadu, which had invested heavily with resources mobilised by taxing its people and also with huge borrowed funds to accelerate economic growth, has been badly let down by the Finance Commission," he said.
The notion that a state with better economic growth should rely on its own resources alone was not based on any sound principle as the power of taxation was "skewed" in favour of the Central government, the chief minister said.
He said that the bulk of the tax revenue due to better economic growth achieved mainly due to state government's efforts, was through Income Tax, Customs Duty, Corporation Tax, Union Excise Duty and Service Tax, all of which accrue to the Centre and leaving only the sales tax to the states.

Panneerselvam, who holds the Finance portfolio, said as a result, a state like Tamil Nadu will face a resource crunch and "will be at the perpetual mercy of the Central government for its resources even for its normal administration."
"The principle of co-operative federalism touted by the Government of India expects states without equal resource capacity to be equal partners with the Centre. Thus the time has come for the Central government to leave all indirect taxation to the states," so that those which lead in economic development are not dragged down for want of resources, he said.