Bangalore. Karnataka Chief Minister Siddaramaiah on Thursday urged the 16th Finance Commission to recommend capping the cess and surcharge at five per cent of gross tax revenue and any amount beyond that should be included in the divisible tax amount.
At a meeting here, he also urged 16th Finance Commission chairman Arvind Panagariya and its members to recommend that at least 50 per cent of the divisible amount of central taxes should be transferred. Siddaramaiah said all non-tax revenues of the Centre should be included in divisible central taxes by bringing in the necessary constitutional amendment. He said economically advanced states are committed to helping poor states, but this should not be at the cost of their own residents or economic efficiency.
Siddaramaiah said, “Moreover, taxpayers in such states expect that their taxes will be used for their benefit. This generates public confidence. Therefore, the Finance Commission will have to work hard to balance equity with efficiency and performance.” The Chief Minister said that due to the disproportionate importance given to equity by the 15th Finance Commission, Karnataka and similar states have to suffer the consequences despite their good performance both in terms of finance and population.
He said that cess and surcharge are not a part of the divisible tax amount, in the last few years the central government has increased its dependence on them. Due to this, the divisible amount is not increasing in the same proportion as the gross tax revenue. All the states have suffered a lot due to this.
Siddaramaiah said that Karnataka will lose Rs 53,359 crore in the period 2017-18 to 2024-25 due to non-sharing of cess and surcharge from the divisible ‘pool’. He said that the reduction in financial transfer from the Center has tied the hands of the states to invest in physical and human infrastructure. This should be resolved immediately.