Question

Which of the following best defines Tax buoyancy?

A It is the ratio of growth in tax revenue to growth in GDP. Correct Answer Incorrect Answer
B It is the ratio of gross tax collected to the total public debt of the state. Correct Answer Incorrect Answer
C It is the ratio of gross tax collected by the state to the percentage of GDP. Correct Answer Incorrect Answer
D It is the ratio of growth in tax revenue to the growth in population. Correct Answer Incorrect Answer

Solution

Tax buoyancy is an indicator to measure efficiency of revenue mobilization with respect to growth in national income. If it is more than one then growth in tax collection would be higher than growth in GDP.

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