Siddaramaiah Writes To CMs of Kerala, TN, Gujarat Alleging Centre’s Unfair Devolution Of Taxes

New Delhi: Karnataka Chief Minister Siddaramaiah on Wednesday raised concerns over what he calls the "unfair" distribution of taxes by the Union government. In a post on tweet (formally X), he revealed that he has written to the Chief Ministers of Kerala , Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra , Gujarat , Haryana , and Punjab about the issue.

States Penalised for Economic Success, Says CM  

“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”, in a post on X Siddaramaiah said.
According to him, this approach penalises economically progressive states and undermines the principle of cooperative federalism.

He claimed that this imbalance threatens the financial autonomy of growth-driven states. Siddaramaiah also highlighted the need for a shift in how the Finance Commission approaches tax distribution, calling for incentives that reward economic performance and better tax mobilisation.

Bengaluru Conclave to Address Fiscal Federalism 

The Chief Minister has invited his counterparts from the concerned states to a conclave in Bengaluru to discuss the issue. The meeting will focus on addressing the challenges of fiscal federalism and pushing for reforms in tax devolution policies.

During the 16th Finance Commission's visit to Karnataka on August 29-30, 2024, Chief Minister Siddaramaiah emphasised the need to reassess the impact of prioritising equity on resource allocation to well-performing states. He noted that reduced central financial transfers are limiting these states' ability to invest in vital infrastructure.

Siddaramaiah highlighted that taxpayers from states contributing significantly to the divisible pool expect a fair return of their taxes. He stressed that the Finance Commission must strike a balance between equity and efficiency to ensure a fair distribution of resources.

He further argued that states contributing substantially to the nation's GDP and tax revenue play a crucial role in national development. Hence, it's essential to reconcile equity with performance for a more robust Union, both politically and economically.

Siddaramaiah called for a coordinated approach from states receiving smaller shares in horizontal devolution relative to their tax contributions. He invited the Chief Ministers of these states to a conclave in Bengaluru to discuss these issues in detail. A formal invitation with the specific dates will be sent once the schedule is finalised.