How is the 'vertical' and 'horizontal' devolution of taxes to the states decided? Highlighting the concerns raised by some states regarding the devolution of taxes, suggest corrective measures.

The Finance Commission (Article 280) devises the basis of vertical (among states & centre) & horizontal (between different states) devolution of finances. Decision on Vertical & Horizontal devolution: (1) Terms of Reference of Finance Commission as instructed by President (Art 280) (2) As per existing fixed by Finance Commission having varying parameters (3) Cost & Surcharge Disproportion (8) (Surcharge (8) - North East & Art 371) (4) Special package to backward state (9) - Bonds & Equity 15th Finance Commission includes: - Demographic performance - Distance Regulation - Fiscal effort - Forest & Ecology (5) Special funds to Disaster management (CPM Act 2005) (6) Consideration of local Bodies elements to the State Finance Commission (Art 243) Concerns raised by some states regarding development of tools: i Paradox of performance - High fiscal earning states are facing dearth of development (9) - Karnataka, Bihar, Uttarakhand disparities ii Fiscal Impugn - as good performa as are facing high fiscal deficit (9) - more FD than Bihar iii Demographic punishment perceived by southern states (9) - Kerala's glitches one population measures iv Cum & discharge not devolved by centre leading to Annihilative federalism v Reserved Federal Bureaucrats by general allocation to ruling party State vi GST grievance compounded in Vertical devolution (8) - (Art Comparison)

Corrective measures: (1) Balancing demographic performance criteria with population criteria in 16th Finance Commission (2) Future of GST compensation as it is ending in 2026 (3) Increasing pool of distribute funds from Cag1, T51 (Public Accounts Committee) (4) Use of technology for both estimation of resources needed (9) - AI models (5) Consensus based mechanism in Finance Commission including state representative (6) Creates for fiscal autonomy to state to borrow from non-government houses (9) - Bonds & Equity The Laxmanan Joseph Committee on Centre state relations on further deliberation on this issue is pursued cooperative fiscal federalism.