The demand for the area based tax concessions to the newly bifurcated states, Andhra Pradesh and Telangana, has gained opposition from Tamil Nadu Chief Minister J Jayalalithaa.
Reportedly, Tamil Nadu CM Jayalalithaa has written a letter to the Prime Minister Narendra Modi, saying any move towards area-based tax concession may lead to relocation of industries and a huge flight of capital from other states and particularly from neighbouring states.
“It would also make the neighbouring states totally uncompetitive. In fact, such concessions to new industries would render existing industries, both in neighbouring states and even in the states where such concessions are granted, completely uncompetitive. These are grave risks which cannot be ignored,” said Jayalalithaa.
“Your government must exercise the greatest care in approaching this issue. Nothing should be done which would distort economic incentives or a level playing field and render states like Tamil Nadu uncompetitive vis a vis their neighbours,” she added.
Jayalalithaa has reportedly shared figures of losses due to such moves in the past. “Such area-based exemptions are also fiscally very expensive. The Statement of Revenue Foregone presented to Parliament in July last, along with the Union Budget, indicated that the total revenue foregone through such area-based tax concessions during last fiscal was Rs 9,267.5 Crore in direct taxes and almost Rs 18,000 Crore in excise duty. These could have been shared with the states”, Jayalalithaa said.