Fiscal federalism
Topic: Framing the Indian Constitution · NCERT: Class 12, Ch 4 "Framing the Constitution"
Meaning
Fiscal federalism means sharing the power to raise taxes and spend money between the Centre and the states. The Constitution made this division while it was being framed (1946-49). It kept the most important taxes with the Centre. Some taxes were shared, and some were left to the states. This was part of a larger plan that tilted power towards the Union.
Example
Under the Constitution, customs duties and Company taxes went wholly to the Centre. Income tax and excise were shared with the states. Estate duties were given to the states. States could also levy land and property taxes, sales tax, and the very profitable tax on bottled liquor. K. Santhanam of Madras warned that this scheme would make the provinces poor.
Don't confuse with
- Three lists (Union, State, Concurrent): these divide the subjects on which each side can make laws. Fiscal federalism is about who can collect which taxes.
Related concepts
- Strong Centre debate
- N. Gopalaswami Ayyangar
- Balakrishna Sharma
- Provincial autonomy
- Union Powers Committee
- Union, State and Concurrent Lists
- Article 356
- K. Santhanam
- A. Ramaswamy Mudaliar