ldquo Tax Buoyancy rdquo in the economy is defined as 1 Ratio of percentage change in tax reve...........

Economic Affairs Tax System

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“Tax Buoyancy” in the economy is defined as:

1. Ratio of percentage change in tax revenue to percentage change in GDP

2. Ratio of change in tax revenue to change in GDP

3. Percentage increase in tax revenues as measured from previous year

4. Incremental change in tax revenues required to increase the GDP by one percent

Select the correct answer using the code given below:

1 only

1 and 2 only

3 only

2 and 4 only

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Explanation:

2nd, 3rd and 4th statements are incorrect in context of 'Tax Buoyancy'.

Tax buoyancy is an indicator to measure efficiency and responsiveness of revenue mobilization in response to growth in the Gross domestic product or National income. A tax is said to be buoyant if the tax revenues increase more than proportionately in response to a rise in national income or output.