The Hindu Business Line : Local bodies should be encouraged to raise own tax revenues: Rangarajan

LOCAL bodies have to be incentivised to raise their own resources after having handed them with the power to raise adequate amount of revenues, the Chairman of the Prime Minister's Economic Advisory Council, Dr C Rangarajan, has said.

Addressing a seminar on `Status of State Finance Commissions', organised by the Society for Participatory Research in Asia in association with the Rajiv Gandhi Institute for Contemporary Studies (RGICS) here, Dr Rangarajan pointed out that currently the own tax revenues of the panchayats accounted for only 6.4 per cent of their total receipts.

"We need to strengthen their (local bodies) abilities both financially and otherwise for ensuring that the third tier of government would become an efficient third tier of government", he said.

A methodology needs to be evolved to induce State Governments to recognise panchayats as a legitimate and appropriate institution for providing local services and, therefore, transfer to them the functions indicated in the Schedules to the Constitution. He said that there is great disparity among States on the issue of transfer of functions to local bodies.

Dr Rangarajan also noted that there is no clear demarcation between the States and the local bodies as regards the power of taxation. "All of them (the powers) rests with the States and whatever the States decide to pass it on goes to the local bodies", he said.

A degree of consensus must be achieved on the revenue resources that should be assigned to the local bodies and the taxes that should be shared.

For this purpose, he said that it might be worthwhile to consider three possibilities and arrive at a consensus: Can all the taxes be shared with the local bodies?

Which taxes should be assigned and which should be shared? And can the tax base be shared with the local bodies?

After arriving at a consensus on which of the three possibilities could be adopted, the State Finance Commissions could then suggest the proportion, which is a function of the extent of transfer of responsibilities to the local bodies.

"If the consensus is not arrived at, then we must be prepared to go one step beyond and provide in the constitution itself those taxes and duties that can be levied by local bodies", he said.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page