Tax Performance and Tax Effort of Andhra Pradesh State in India
B. Narayana Swamy
Research Scholar, Department of Economics, Sri Krishnadevaraya University, Ananthapuramu
Prof. M. D. Bavaiah
Research Supervisor, Department of Economics, Sri Krishnadevaraya University, Ananthapuramu
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http://doi.org/10.37648/ijps.v20i01.027
Abstract
This paper examines the tax performance and tax effort of Andhra Pradesh, a State carved out by the reorganisation of 2014, over the eleven financial years 2014-15 to 2024-25. Using State's Own Tax Revenue (SOTR), the State's share in central taxes and Gross State Domestic Product (GSDP) at current prices, performance is judged through tax-GSDP ratios, the composition of tax revenue, growth rates and buoyancy. Tax effort is measured as the ratio of actual SOTR to the SOTR predicted by a tax-capacity function in which SOTR is regressed on GSDP (SOTR = 12,344 + 0.0496 GSDP; R2 = 0.977). The SOTR-GSDP ratio fell from 8.12 per cent in 2014-15 to 5.57 per cent in 2024-25, and the total tax-GSDP ratio from 11.03 to 8.81 per cent, because SOTR grew at 7.7 per cent per annum against 11.8 per cent for GSDP (elasticity of about 0.8). The share of central taxes in total tax revenue rose from 26.4 to 36.8 per cent. The tax effort index moved in a narrow band of 94.3 to 111.0 (mean 100.1) and exceeded 100 in five of the eleven years; the shortfalls were concentrated in 2015-16 to 2017-18, the pandemic year 2020-21 and 2024-25. The decline in the ratio therefore reflects a structurally GSDP-inelastic tax base more than a persistent lapse in effort. The paper suggests base-broadening, compliance-oriented administrative reform and revenue stabilisation to arrest the decline in the tax-GSDP ratio and to reduce growing reliance on central transfers.
Keywords:
tax effort; tax capacity; tax buoyancy; State's own tax revenue; Andhra Pradesh; fiscal federalism
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