Tamil Nadu’s own-tax effort has ‘collapsed’, says White Paper
“The State’s own tax efforts have collapsed,” said the White Paper presented Tuesday by Finance Minister N. Marie Wilson.
Explaining how the State’s Own Tax Revenue (SOTR) has performed against three “peer States” (Maharashtra, Gujarat and Karnataka) in the last five years, the White Paper stated that SOTR is “the largest component under the State’s most direct control and the most reliable indicator of fiscal effort.”
The state’s “own tax revenue” is derived from “five main sources”: commercial taxes (Goods and Services Tax), Value Added Tax (VAT) on oil, State Consumption Tax and VAT on liquor, Stamp and Registration, Motor Vehicles Tax and other taxes.
Within broader business taxes, GST accounted for approximately 53%; VAT on alcohol, 28%; and VAT on petroleum products, 19%. “[Revenue from] Business taxes as a proportion of GSDP (Gross Domestic Product) decreased from about 4.53 percent in 2021-22 to about 3.89 percent in 2025-26, the document said.
Pointing out that Total Revenue Receipts (TRR) fell from around 10% of GSDP in 2021-22 to 8.32% in 2025-26, the beginning of the post-COVID window, the official document said SOTR/GSDP ratio fell from 5.93% to 5.45%, which was the “lowest and steepest decline in the State’s history” among comparative indicators. States. However, in 2006-07, SOTR reached a peak of 8.94% as a percentage of GSDP. The cumulative decline from the historical peak meant that around Rs 1.23 lakh crore in annual revenue (about 90% of the 2025-26 interim fiscal deficit) was given up.
“The decline is spread across all major tax headings (GST, VAT on petrol, State Excise Duty, Stamp Duty and Motor Vehicles Tax),” the document states, adding that a significant portion of this is attributed to “leakages and systemic corruption” in revenue collection departments rather than structural economic disadvantage.
The White Paper mentioned that “the peer comparison between SOTR and GSDP offers a worrying analysis”, raising the question “whether Tamil Nadu’s income decline is due to external structural forces or domestic policy and administrative failure”.
In the post-COVID window from 2021-22 to 2025-26, Maharashtra’s SOTR-GSDP rate increased by 1 percentage point, while Karnataka and Gujarat more or less maintained their rates. “Only in Tamil Nadu has a decline in this rate been recorded; from 5.93% in 2021-22 to 5.45% in 2025-26,” the document said.
As a result of the poor performance in SOTR collections, the ratio of interest payments to SOTR increased from 33.83% in 2021-22 to (provisional) 34.83% in 2025-26.
“More than a third of every rupee raised by the State through its own taxation efforts goes directly towards servicing 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 income.
The report said that although revenue collections in 2025-26 increased (provisionally) from 1,942 crore in 2024-25 to ₹4,433 crore following the implementation of Mineral Bearing Land Tax, revenue was “generally flat” in the post-COVID years.
Stating that the share of mining revenues in total revenues is only 1.5%, the White Paper stated that “this is not a reflection of resource scarcity.” The state had “significant deposits” of granite, limestone, sand, quartz, vermiculite and a number of other minor minerals. The report stated that royalties, rents and seigniorage fees for small mines contribute to mining revenue.
TVK government published a technical report on State finances
TVK government published technical report on State finance | Video Credit: The Hindu
“The revenue potential of this head is materially greater than existing collections indicate,” the White Paper said, identifying several factors for the current situation. Factors included “lack of revision of fees, leakage in assessment of minor mineral extraction, deliberate delay of applications for external reasons, inadequate enforcement against unauthorized mining and slow modernization of departmental systems”.
It was published – 16 June 2026 23:58 IST
