Indian Economy

General Studies (CGL)

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Buoyancy of a tax is defined as–

Percentage increase in tax revenue/percentage increase in tax base

Increase in tax revenue/percentage increase in tax coverage

Increase in tax revenue/increase in GDP

Percentage increase in tax revenue/increase in tax coverage

Explanation:

Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP.
Tax buoyancy measured by dividing the growth in tax collections for each year by the nominal GDP growth.

By: Amit Kumar

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