54. A decrease in tax to GDP ratio of a country indicates which of the following?
1. Slowing economic growth rates
2. Less equitable distribution of national income
Select the correct answer using the code given below.
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
Official answer key says option A is correct. Can someone provide the rationale. I am unable to understand how it could be A.
@eclectus thanks for giving your two cents. But low tax revenue does not necessarily mean low tax to GDP ratio, right? In case the fall in tax revenue is commensurate to the fall in GDP. Is there some established economic concept that if GDP falls, the tax to GDP ratio falls at a higher proportion? Something conceptually opposite to tax buoyancy.
