Q. Which one of the following is correct regarding a high tax buoyancy?

[A] Tax revenue increases at the same rate as GDP.

[B] Tax revenue decreases while GDP increases.

[C] Tax revenue increases at a higher rate than GDP.

[D] Tax revenue remains constant despite GDP growth.

Answer: C
Notes:

Explanation – Tax buoyancy measures the responsiveness of tax revenue to changes in the Gross Domestic Product (GDP). High tax buoyancy occurs when tax revenue increases at a higher rate than GDP, indicating that the tax system is efficient and effective in capturing revenue from the growing economy.

Source: The Times of India

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