INTERSTATE TAX DISHARMONY IN INDIA - A COMPARATIVE PERSPECTIVE

Interstate tax disharmony arising from the states' attempt to ''free-r ide'' on other states can cause distortions and inequity in a federal system. In this article, an attempt is made to analyze interstate dish armony in the Indian tax system, provide a quantitative measure of dis harmony, examine its trend over time, and compare the degree of dishar mony in India with three other important federations. The major conclu sions are that (1) India has a higher degree of interstate tax disharm ony than Australia, Canada, and the United States; (2) tax disharmony in India has increased over time unlike in the other three federations ; and (3) tax disharmony in respect of individual state taxes is highe r than the taxes taken in aggregate.