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The Rediff Election Special/Sunil Jain in New Delhi
January 30, 2003
If tax collection figures are anything to go by, the image of the law-abiding south Indian and the lawless north Indian appear to be largely correct.
An analysis of 28 states shows, by and large, southern states have a higher tax-to-gross domestic product ratio than northern ones. Bihar has a tax-to-GDP ratio of 3.07 in 2001-02 while Karnataka 8.55.
Haryana is the exception to this rule and has a tax-to-GDP ratio of 8.84. Prosperous neighbour Punjab has a tax-to-GDP ratio of only 6.64.
While Haryana's tax-to-GDP ratio has risen steadily over the past five years, from 6.12 in 1996-97, Bihar's has been falling from 4.19 in 1996-97.
Bihar and Haryana have seen their non-tax incomes go down as a per cent of the GDP, a reflection of the huge subsidies on user-charges for electricity. Bihar has registered among the lowest tax growth.
Despite being the most prosperous state, Gujarat has a low tax-to-GDP ratio of 7.32 -- while this is high by north Indian standards, comparable states in terms of industrialisation, like even Maharashtra, have a tax-to-GDP ratio of 8.09.
Thanks to a policy of giving tax-breaks to attract investment, Gujarat's tax growth is much lower than even the national average.
While tax collections for 28 states grew 1.80 times from 1996-97 to 2001-02, those for Gujarat grew only 1.55 times.
The best in terms of the tax collection growth is Andhra Pradesh. Tax collection in Andhra Pradesh grew from Rs 4,882 crore (Rs 48.82 billion) in 1996-97 to Rs 11,657 crore (Rs 116.57 billion) in 2001-02, an increase of 2.38 times.
This took the state's tax-to-GDP ratio from 6.58 in 1993-94 to 5.4 in 1996-97, to a healthy 7.83 in 2001-02. Andhra Pradesh is one of the few states where the tax-to-GDP ratio has been rising since 1993-94.
Most southern states, though, have seen their tax-to-GDP ratio decline steadily. Karnataka, whose tax growth in the last five years has been below the average for 28 states, has seen this critical ratio fall from 9.28 in 1993-94 to 8.79 in 1996-97, to 8.55 in 2001-02.
Kerala's tax growth was even lower than Karnataka's, and its ratio has fallen from 8.91 to 8.77 to 7.64 between 1993-94 and 2001-02.
Tamil Nadu's tax growth is also below the national average and tax-to-GDP ratio fell from 8.35 in 1993-94 to 8.27 in 2001-02.
Interestingly, while the tax-to-GDP ratio for 28 states has grown at around 12 per cent annually for the last five years, that for the Centre has grown at a lower rate.
For all the states taken together, the tax-to-GDP ratio has gone up from 5.72 in 1996-97 to 6.18 in 2001-02 -- again, almost on par with the central government taxes which grew from 9.4 per cent of the GDP to 9.9 during the same period.
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