Consider the following terms regarding Tax Buoyancy 1 Tax buoyancy explains this rela...........

Economic Affairs Tax System

Consider the following terms regarding Tax Buoyancy:

1. Tax buoyancy explains this relationship between the changes in government's tax revenue growth and the changes in GDP.

2. A tax is said to be buoyant if percentage change in tax collection is greater than percentage change in GDP.

Select the correct code:

1 only

2 only

Both 1 and 2

None of the above

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Explanation:

Tax buoyancy means how much increase takes place in tax revenues with an increase in GDP/National income. Thus, if one percent of rise in national income results in more than one percent rise in tax revenue from a certain tax , it can be saved that the tax is highly buoyant .