Centre-State Tax Allocation Row: Kerala CM Pinarayi Vijayan Pitches for 50% Share in Central Taxes As Opposition Ruled States Discuss 16th Finance Commission Recommendations

Thiruvananthapuram, September 12: Kerala Chief Minister Pinarayi Vijayan has called for a significant increase in the share of taxes distributed to the states, proposing that the states' share be raised to 50 per cent of the net proceeds of the Union's taxes. The demand was made on Thursday during a high-level conclave with opposition ruled states finance ministers to discuss key issues ahead of the 16th Finance Commission's recommendations.

The event saw the participation of representatives from various states, including Telangana Deputy Chief Minister and Finance Minister Bhatti Vikramarka Mallu, Karnataka Revenue Minister Krishna Byre Gowda, Punjab Finance Minister Harpal Singh Cheema, and Tamil Nadu Finance Minister Thangam Thennarasu. In his address to finance ministers of opposition ruled states, Vijayan pitches for higher percentage of share to states in central taxes. Karnataka CM Siddaramaiah Invites 8 CMs to Discuss 'Unfair' Devolution of Funds by Centre.

"Kerala had demanded in its Memorandum to the 15th Finance Commission that the preceding share of taxes to be distributed to the States needs to be raised to 50 per cent of the Net Proceeds considering the persisting Vertical Fiscal Imbalance between the taxing powers and expenditure obligations of the Union and the States," CM Vijayan said. He urged that a united front from various states could help persuade the 16th Finance Commission to favour this crucial adjustment.

As per the recommendations of the 14th finance commission, currently 41 per cent of the central taxes are shared among various states. The share of states is calculated on various parameters that includes population, demography, income distance, area, and forest cover of the state. Additionally, the Kerala CM also asked for a more equitable distribution of taxes among states, especially considering the varied levels of per capita income and development across India.

He noted that while states with lower incomes must receive adequate support, those that have made significant strides in improving health, education, and demographic indicators should not be penalized by receiving a reduced share of taxes. "The issue of distribution of taxes among the States also needs due consideration. The 16th Finance Commission has the task of delicately balancing the interests of the States which have a low per capita income and a larger share of population and others which have achieved the aims of the National Population Policy, 1976. While taking care of the interests of the former, the latter cannot be made to face continuously falling tax shares, as has been happening," Vijayan added. Telangana CM Revanth Reddy Appeals Finance Commission To Increase States’ Share in Central Taxes to 50% Amid Rising State Debt.

Citing Kerala's diminishing share in tax revenue--falling from 3.05 per cent under the 11th Finance Commission to 1.92 per cent under the 15th--the Chief Minister emphasized the need for a balanced approach in the new tax distribution formula. "Our share in taxes has fallen from 3.05 per cent in the 11th Finance Commission to 1.92 per cent in the 15th Finance Commission. Other states whose representatives are here, too, have similar experiences. Due consideration has to be given to the needs of states which have taken extra efforts to achieve health, education, and demographic indicators," he noted.

The meeting was held to discuss the tax issues faced by some states that are to be highlighted before the 16th Finance Commission, which has commenced its work for recommendations on the devolution of taxes to the states, covering an award period of five years commencing 1st April 2026.

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