Q. With reference to Tax Buoyancy and Tax Elasticity, consider the following statements:
1.Tax buoyancy measures how tax revenues change in response to changes in the tax rate.
2.Tax elasticity refers to the responsiveness of tax revenue to changes in Gross Domestic Product (GDP).
3.A high tax buoyancy indicates that tax revenue is growing faster than the economy.
Which of the statements given above is/are correct?
Answer: C
Notes:
Explanation:
- Tax elasticity measures how tax revenues change in response to changes in the tax rate.
- Tax buoyancy refers to tax revenue responsiveness to GDP; elasticity is about responsiveness to tax rate
- High tax buoyancy means tax revenue increases at a higher rate than GDP, indicating efficient tax collection or strong economic performance.
Source: Indian Economy (N.C.E.R.T)
