The power given to the Parliament to legislate on exclusively State subjects in the following situations: With respect to the matters in the State list in national interest, but for a limited period (article 249) In respect of any matter in the State list if the proclamation of emergency is in operation (articles 250 and 353) For two or more States by consent of States (article 252). While the Constitution has indicated the broad framework for the terms of reference of the Finance Commission, it allows the Finance Commission to determine its own principles for making recommendations in relation to the tasks assigned to it. The Constitution also permits the Finance Commission to follow its own procedure in the matter. In addition to the Constitutional provisions, Parliament has enacted the Finance Commission (Miscellaneous Provisions) Act, 1951, which prescribes the qualifications for the chairman and members of the Finance Commission and also the procedure that the Finance Commission should follow to perform its duties. The ensuing paragraphs review the principles adopted by the Finance Commissions for assessment of the finances of the Centre and the States and for the tax devolution, grants-in-aid and other items of the Transfer of Resources. In many federations most major taxes are collected centrally but the revenue is shared between the national and sub-national levels of government. The sub-national levels of government are then left to balance their budgets by imposing their own taxes to supplement their fixed share of national tax. Mathews (1986, p.54), who did take fiscal federalism seriously, noted that in a modern federation, the revenue powers “ and expenditure responsibilities of the different levels of government are so interdependent that it is no longer possible for governments to make effective taxing and spending decisions without regard to the effects of those decisions on other governments”. In a federation, the ideal situation is for each level of government to raise the taxes necessary to fulfil its expenditure responsibilities. This ensures that each government is accountable and cannot shift blame to another government for high taxes or inadequate expenditure. It also forces governments to make the hard choices involved in balancing the burden of tax against the need for services.
The power given to the Parliament to legislate on exclusively State subjects in the following situations: With respect to the matters in the State list in national interest, but for a limited period (article 249) In respect of any matter in the State list if the proclamation of emergency is in operation (articles 250 and 353) For two or more States by consent of States (article 252). While the Constitution has indicated the broad framework for the terms of reference of the Finance Commission, it allows the Finance Commission to determine its own principles for making recommendations in relation to the tasks assigned to it. The Constitution also permits the Finance Commission to follow its own procedure in the matter. In addition to the Constitutional provisions, Parliament has enacted the Finance Commission (Miscellaneous Provisions) Act, 1951, which prescribes the qualifications for the chairman and members of the Finance Commission and also the procedure that the Finance Commission should follow to perform its duties. The ensuing paragraphs review the principles adopted by the Finance Commissions for assessment of the finances of the Centre and the States and for the tax devolution, grants-in-aid and other items of the Transfer of Resources. In many federations most major taxes are collected centrally but the revenue is shared between the national and sub-national levels of government. The sub-national levels of government are then left to balance their budgets by imposing their own taxes to supplement their fixed share of national tax. Mathews (1986, p.54), who did take fiscal federalism seriously, noted that “ in a modern federation, the revenue powers and expenditure responsibilities of the different levels of government are so interdependent that it is no longer possible for governments to make effective taxing and spending decisions without regard to the effects of those decisions on other governments”. In a federation, the ideal situation is for each level of government to raise the taxes necessary to fulfil its expenditure responsibilities. This ensures that each government is accountable and cannot shift blame to another government for high taxes or inadequate expenditure. It also forces governments to make the hard choices involved in balancing the burden of tax against the need for services.
c-chapter-ii.docx