State Finance Minister Palanivel Thiaga Rajan Releases White Paper TN’s Finances, Hints At Possible Tax Hike

State finance minister Palanivel Thiaga Rajan on Monday released the much-awaited white paper on the state’s finances and hinted at a possible upward revision of taxes to steer the state in the path of growth.

Releasing a 100 plus page white paper on the state’s finances, Thiaga Rajan put the total outstanding (visible) debt of the state at Rs 5.7 lakh crore, which amounts to Rs 70,000 on every citizen of the state, and said, “Zero tax is a meaningless statement. Our principle is collecting the right amount of tax from the right people to steer the state’s growth.” Wondering how would a government function without collecting tax, the state finance minister said the steady deterioration in the state’s finances post 2013-14 was apparent from the trends in revenue and fiscal deficits and the Covid pandemic has caused a further substantial deterioration in 2020-21. “Finance of no other major state declined as much as Tamil Nadu in the last five years,” the minister, comparing the electricity board of TN and Bihar to demonstrate how the board of Bihar had better credit quality.

Arguing that the fiscal deficit was maintained within the prescribed 3% limit by postponing certain items of expenditure since 2013-14, the minister said the fiscal deficit was primarily due to high revenue deficits, which forced the state to borrow more and more to pay salaries and interest on past loans rather than on productive capital expenditure.

Noting that the revenue deficit of the state, which peaked at 13.35% of GSDP (Gross state domestic product) in 2008-19 reduced to 5.82% in 2019-20, Thiaga Rajan said that a major course correction is needed to put TN’s own revenue receipts back on a growth path.

Asked if the state’s finances have reached a point where tax hike was inevitable, he said that some taxes like motor vehicle tax have not been revised in the past 15 years in TN and average revenue from a vehicle in TN is substantially lower than in Karnataka and Kerala.

Proposing rationalization of electricity tax which was long overdue, the minister pegged the daily loss of TNEB at Rs 55 crore per day and said that a rich person consuming more should pay higher tax and the poor less tax. A tightlipped Thiaga Rajan who refused to commit to the extent of a tax hike or if tax hike would be effected at all said the white paper or the finances would not affect the government from delivering on its poll promises and it was up to the chief minister and ministers concerned to decide on the issue of hiking taxes on their respective departments.