ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Biased NormsSubscribe to Biased Norms

FINANCE COMMISSION-Biased Norms

Biased Norms THE Ninth Finance Commission cannot have been unaware of the questions which its use of the poverty ratio as a criterion for tax-sharing among the states was bound to raise. Indeed, it is very much on the defensive when it concedes that "a state with high per capita income does have the potential to mitigate the poverty of its less fortunate citizens'' and that "presistence of poverty could be traced partly to lack of will or inefficiency on the part of the state government concerned'', but then it takes cover behind the stock argument always advanced by the high income states in support of their plea for a higher share of taxes, namely, that "the incomes of the rich residents of various states are also subject to central taxes and the states' capacity to tax them gets accordingly limited". Is not this precisely the argument which has been used to justify the inter-state allocation of 10 per cent from the income-tax pool on the basis of collection? And was the Ninth Finance Commission merely looking for one more excuse to favour the high income states in the allocations from the divisible pool? The poverty ratio criterion, incidentally, applies not only to income-tax but also to excise duties.
Back to Top