Tamil Nadu’s push for its own taxes has “collapsed”, says White Paper

A white paper unveiled by Finance Minister N. Marie Wilson on Tuesday said “the state’s push for its own taxes has collapsed”.

How State Own Tax Revenue (SOTR) has performed against three “peer states” (Maharashtra, Gujarat and Karnataka) over the last five years, the white paper states that SOTR marks “the largest component most directly under the control of the state and the most reliable indicator of fiscal effort”.

“The state’s own tax revenue is derived from five main sources”, which were commercial taxes (goods and services tax), value added tax (VAT) on petroleum, state excise duty and VAT on spirits, stamp duty and registration, motor vehicle tax and other taxes.

Within wider commercial taxes, GST accounted for around 53%; VAT on liquor, 28%; and VAT on petroleum products, 19%. “(Revenues from) Commercial taxes, as a share of GSDP (Gross State Domestic Product), fell from around 4.53% in 2021-22 to around 3.89% in 2025-26 – a decline not seen in peer states,” the document said.

Pointing out that total revenue (TRR) has fallen from around 10% of GSDP in 2021-22, the start of the post-COVID era, to 8.32% in 2025-26, the official document said the SOTR to GSDP ratio has fallen from 5.93% to “the highest decline in the states’ history” to 5.45. comparative states. However, in 2006-07, SOTR as a percentage of GDP peaked at 8.94%. The cumulative decline from the all-time high meant that around ₹ 1.23 lakh crore in annual revenue was saved – around 90% of the provisional fiscal deficit for 2025–26.

“The decline is across all major tax heads – GST, petroleum VAT, state excise, stamp duty and motor vehicle tax,” the document points out, attributing a significant portion to “evasion and systemic corruption” in revenue collection departments rather than structural economic disadvantage.

The White Paper states that “a head-to-head comparison of SOTR and GSDP presents a troubling analysis”, raising the question of whether “Tamil Nadu’s revenue decline is the result of external structural forces or internal political and administrative failure”.

In the post-COVID period from 2021-22 to 2025-26, Maharashtra’s SOTR to GSDP ratio increased by 1 percentage point, while Karnataka and Gujarat more or less maintained their ratios. “Tamil Nadu alone has seen a decline in this ratio – from 5.93% in 2021-22 to 5.45% in 2025-26,” the paper said.

As a result of the poor collection performance of SOTR, the ratio of interest payments as a share of SOTR has increased from 33.83% in 2021–22 to 34.83% in 2025–26 (Provisional).

“More than one-third of every rupee that the state collects through its own tax efforts goes directly to repay past debts,” the White Paper added.

The White Paper said mining revenue was among the “most striking examples of stagnation” in Tamil Nadu’s non-tax revenue.

While revenue collection increased to ₹4,433 crore (provisional) in 2025-26 from ₹1,942 crore during 2024-25, after the imposition of tax on mineral-bearing land, revenue was “completely flat” in the post-COVID years, the report said.

The white paper pointed out that mining revenue as a share of total revenue is barely 1.5%, “this is not a reflection of a lack of resources”. The state had “considerable deposits” of granite, limestone, sand, quartz, vermiculite and a number of other minor minerals. Mining revenues were contributed by royalties, rents and mining fees for minor minerals, the report said.

The TVK government published a white paper on state finances

The TVK government published a white paper on state finances Video Credit: The Hindu

“The revenue potential of this head is substantially greater than current collections suggest,” the White Paper said, identifying several factors in the current state. Factors included “lack of review of fees, leakages in the assessment of small-scale mineral extraction, deliberate withholding of applications for extraneous reasons, insufficient enforcement against illegal mining and slow modernization of departmental systems”.

Published – 16 Jun 2026 23:58 IST