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Tamil Nadu chief minister J Jayalalithaa on Monday urged prime minister Narendra Modi to go slow on fiscal and economic benefits to Andhra Pradesh and Telangana as they would make Tamil Nadu uncompetitive.
In a letter to the prime minister, Jayalalithaa urged the central government to decide on area based tax incentives to Andhra Pradesh and Telangana in a way that would not render Tamil Nadu uncompetitive for investments.
The Andhra Pradesh State Re-organization Act, 2014, already contains a substantial and significant economic package, she said urging the prime minister to adopt a cautious approach to the
complex issue of providing area based tax concessions in the name of encouraging economic development in these two States.
Area based tax incentives run counter to one of the basic thrusts of economic reforms — a rational tax policy that is neutral, encourages a common market in the country, rewards competitive efficiency, and exploits comparative advantage, Jayalalithaa said.
“Your government must exercise the greatest care in approaching this issue. Nothing should be done which would distort economic incentives or a level playing field and render States like Tamil Nadu uncompetitive vis a vis their neighbours. It would be highly ill-advised to offer across the board area based tax concessions,” Jayalalithaa said in her letter.
There could be flight of capital from Tamil Nadu to neighbouring states, she said.