Articles by S Gurumurthi

The paper analyses the current division of responsibility between the centre and the states with regard to commodity taxation in its historical perspective and the efforts initiated during the last 15 years to introduce the VAT in place of union excise duties at the central and the sales taxes at the state levels. It offers an alternative VAT model for India based on certain principles applicable also to other federal economies planning to introduce the VAT.

Three Faces of Tax Sharing III S Gurumurthi III Horizontal Redistribution of Tax Revenue among Subnational Governments WE now turn our attention to the third and final section of this paper, namely, the horizontal redistribution of shared taxes among the subnaiional governments. Though the distribution of shared revenues among subnational governments is often made on a derivation basis, with each jurisdiction getting the share of the revenue collected in its territory as in the case of Germany for sharing of revenues from the personal and corporate income taxes, this principle cannot be used to correct horizontal imbalances since, under these arrangements. the level of the transfer from the centre to each subnational government is positively correlated with the taxing capacity of the latter In countries with vast regional disparities in levels of development and special problems, it is necessary to evolve appropriate redistributive criteria to apportion the revenues. In Australia, the system of equalisation aims at ensuring equal ability of the states to provide a standard level of public services at an average level of taxation. In Canada, equalisation transfers to provinces are based only on their relative taxing capacities and do not take into account relative expenditure needs. Countries like Denmark. Japan, and Korea use indicators tike demographic characteristics, population density, and length of roads for equalisation. While equalisation grants thus take care of the problem of horizontal imbalances, it is necessary to evolve suitable criteria for redistribution of shared lax revenues among the provinces in order to address horizontal imbalances. While this is particularly important in the ease of developing countries, it would also be significant even in developed countries where regional disparities may be rather large as in the case of Canada.

Three Faces of Tax Sharing -I S Gurumurthi Tax revenue-sharing is probably the most important element of intergovernmental fiscal relations. This issue has three major dimensions, namely, tax assignment between the federal and subnational governments, vertical tax revenue-sharing between the federal and situational governments and horizontal redistribution of shared tax revenue among the subnational governments.

Lessons from Tamil Nadu S Gurumurthi Both the central and state governments have embarked on a massive attempt to reform the commodity taxation regime in India, with Maharashtra and Tamil Nadu being the first states to introduce value added tax. In the last budget Tamil Nadu has introduced several changes in the regime and a long-term taxation policy which will establish a stable sales tax regime. This paper takes a critical took at the new policy.

A Possible Model for VAT in a Federal Economy S Gurumurthi Despite its avowed merits, introduction of VAT in a country with a federal structure is fraught with difficulties. This paper discusses this issue with a view to suggesting a possible approach to moving towards VAT in a large federal economy such as India.