Question

A tax is said to be if the tax revenues increase more than proportionately in response to a rise in national income or output.

• A. Buoyant
• B. Proportional
• C. Elastic

Answer 1

The correct option is A Buoyant

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. 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. A tax is buoyant when revenues increase by more than, say, 1 percent for a 1 percent increase in GDP. Usually, tax elasticity is considered a better indicator to measure tax responsiveness