Question

Q. In the context of economy, which of the following correctly describes the term “Tax expenditure”?

• A. Expenditure incurred for the Government during the collection of taxes.
• B. Amount used by the Government to manage its expenditure from its tax collection.
• C. The share of tax in the expenses of a household for paying taxes to the Government.
• D. Concessions provided to the taxpayers by the Government.

Answer 1

The correct option is D Concessions provided to the taxpayers by the Government.

Explanation:

Tax expenditure or the revenue foregone refers to the concessions or exemptions that are provided to the taxpayers by the government. The aim of the tax expenditure is to promote important economic activities like health sector, Research and Development, Agriculture etc.
Since these exemptions from paying taxes are indirectly some sort of expenditure for the Government to the tune of the tax concessions made to the taxpayer. This is called Tax expenditure made by the government to realize the given objective.