Tamil Nadu Assembly passes resolution urging Centre for fair tax devolution

Chennai (Tamil Nadu) [India], August 7 : Tamil Nadu Assembly on Friday passed the resolution urging the Centre for equitable and fair devolution of taxes, invoking the principle of fiscal federalism.
Finance Minister N Marie Wilson moved the government's resolution and argued that a "fair and equitable system of financial devolution is essential for States to effectively discharge their responsibilities."
The resolution asks the Centre to ensure that the State receives its due share of financial devolution from the taxes contributed to the Union Government, consistent with the constitutional principles of fiscal federalism, equity and fairness.
The resolution also urges the Centre to adopt a "transparent, objective and equitable methodology" for the devolution of central taxes that "appropriately recognises the contribution, fiscal effort, governance performance and developmental needs of the States."
"Appropriate measures should be taken to safeguard the legitimate financial interests of the State of Tamil Nadu while making future arrangements relating to the devolution of Union taxes," the resolution states.
Addressing the House, the finance minister highlighted Tamil Nadu's contribution to the economy.
He said, "Tamil Nadu has continued to make a significant contribution to the national economy through sustained economic growth, industrial development, exports, sound financial management, and its substantial contribution to taxes collected by the Union Government."
"Furthermore, the devolution of Union taxes should be based on the principles of equity, equal rights, fiscal effort, good governance and the developmental needs of the States. States that have performed well in population control and human resource development should not be placed at a disadvantage," Wilson added.
However, former Finance Minister and DMK leader Thangam Thennarasu said that the resolution was "general in nature" and proposed an amendment seeking 50 per cent of the divisible pool of taxes collected by the Centre is devolved to the States.
"The resolution, in its present form, is general in nature. Based on the views already presented before the Finance Commission, the share of financial devolution should be fixed at 50 per cent," he said.
"Therefore, this resolution should be amended accordingly. This debate should be about reclaiming the rights that we have lost. The question has arisen as to where the strength of Indian federalism lies. The appropriate answer should be the rights of the States. Our then Chief Minister MK Stalin has strongly put forward Tamil Nadu's views at NITI Aayog meetings. The expenditure responsibilities lie with the States, while the major revenue sources remain with the Union Government," the DMK leader told the House.
He argued that presently, Tamil Nadu gets 29 per cent share of its contribution to the national economy.
He said, "Our contribution to the growth of the country has been immense. Despite giving due importance to fiscal discipline, Tamil Nadu continues to be neglected in the devolution of funds. For every 1 rupee contributed, the Union Government gives Tamil Nadu only 29 paise."
AIADMK General Secretary Edappadi K Palaniswami supported the resolution.
EPS said, "We have repeatedly urged the Union Government to ensure a fair distribution of funds between the Union and the States. During our tenure, the Union Government released the funds required by the States, enabling various schemes to be implemented. We have continued to insist on the need for adequate financial devolution. We support this resolution."