Nirmala Sitharaman: Not even ‘wickedest’ FM can tweak tax share of states

Union Finance Minister Nirmala Sitharaman on Wednesday (February 28) said the tax devolution share of states is decided by the Finance Commission and not even the “wickedest” finance minister could tweak it in favour of one state or another.

“The central government has no role to play except to obey the Finance Commission. The Finance Commission tells me, ‘You give this much per month’, I have to do it,” she said at the Express Adda organised by Indian Express in Bengaluru.'

'Dangerous threshold'

Regarding the recent comments by Opposition leaders in southern states collectively demanding their share of taxes from the Centre, Sitharaman said, “It’s now getting into this very dangerous threshold of 'southern states together'. A responsible MP from Karnataka said ‘we’ll have a separate southern state’. It cannot go that extent. States, please sit with the Finance Commission, work it out.”

On the question of the rising share of cesses and surcharges of the central government which is not part of the divisible pool with the states, the finance minister said the Constitution allows the Centre to do so. “Would you then change the Constitution? The central government has every right to levy such surcharges and cesses,” she said.

Among the domestic issues of jobs, monopolies, privatisation, rural consumption, and private investments, Sitharaman said what concerned her most was private investments (insufficient, apparently). In the same breath, she said what has made India attractive is that there is absolutely no whisper of corruption, and there is stability in policy, predictability in taxation, and the inclination towards greater reforms and transparency.

Reforms by the states

The finance minister said the central government would focus on the next generation reforms, but emphasised that not everything was in the court of the Union government, and that a lot could be done by the states. “There are issues which are very peculiar to some states. Many things are happening in the states, and many states are doing it at such speed, it is going to set the track for many others to follow,” she said.

Commenting on the role of investigative agencies probing businesses, she said the government does not have an issue with purchases made with tax-paid money.

“I don’t mind if they are doing it with white money. Let them get it (properties) anywhere. Moon. South Pole. But if you go with other kinds of money, of course I’ll be after you. If we don’t, India will be put on the grey list of FATF (Financial Action Task Force). Once you’re on the grey list, nobody is going to invest in your country,” she concluded.