Q. Consider the following:
1. Demographic performance
2. Forest and ecology
3. Governance reforms
4. Stable government
5. Tax and fiscal efforts
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distanc
Horizontal Tax Devolution- comparison between 14th and 15th Finance Commission.
| Parameters | 14th Finance Commission (2015-20) | 15th Finance Commission (2020-21) | 15th Finance Commission (2021-26) |
| Population (1971) | 17.5% | 0% | 0% |
| Population (2011) | 10% | 15% | 15% |
| Area | 15% | 15% | 15% |
| Forest Cover | 7.5% | 0% | 0% |
| Forest and Ecology | 0% | 10% | 10% |
| Income Distance | 50% | 45% | 45% |
| Tax and Fiscal Efforts | 0% | 2.5% | 2.5% |
| Demographic Performance | 0% | 12.5% | 12.5% |
Statement 1 is correct- Demographic performance refers to the assessment of population-related factors such as population growth rate, demographic composition, and demographic changes over time. The Commission used 2011 population data for its recommendations. States with a lower fertility ratio will be scored higher on this criterion. The 15th Finance Commission suggested 12.5% weightage to the Demographic performance.
Statement 2 is correct- Forest and ecology refer to the assessment of environmental factors, including the preservation and conservation of forests, biodiversity, and ecological balance. This criterion has been determined by calculating the proportion of dense forest within each state relative to the total dense forest across all states. The 15th Finance Commission suggested 10% weightage to the Forest and Ecology.
Statement 3 is incorrect- Governance reforms encompass various measures aimed at improving the efficiency, transparency, and effectiveness of government operations and public service delivery. This criterion was not considered by the Fifteenth Finance Commission as one of the criteria for horizontal tax devolution.
Statement 4 is incorrect- Stable government refers to the political stability and continuity of government institutions. While stability in government can be a desirable factor, it was not explicitly mentioned as a criterion for horizontal tax devolution by the Fifteenth Finance Commission.
Statement 5 is correct- Tax and fiscal efforts involve the assessment of a state’s efforts in tax collection and fiscal management. This criterion has been employed to incentivize states with better efficiency in tax collection. It is determined by the ratio of the average per capita own tax revenue to the average per capita state GDP over a three-year period from 2016-17 to 2018-19. The 15th Finance Commission suggested 2.5% weightage to the Tax and fiscal efforts.
Source: https://prsindia.org/policy/report-summaries/report-15th-finance-commission-2021-26
