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

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Tax Devolution and Regional Disparities

The changes introduced by the Twelfth Finance Commission in the horizontal devolution formula determining the inter se tax shares of individual states have effectively reduced its progressivity at a time when regional disparities are worsening. Equity considerations necessitate greater utilisation of criteria that reflect the variations in the levels of regional development, if the poorer states are to overcome differentials in revenue capacity by obtaining a larger share in Finance Commission awards.

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