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Tax Buoyancy and Tax Elasticity: Unveiling the Dynamics of Fiscal Response to Economic Growth

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Summary

This blog examines tax buoyancy and tax elasticity, crucial measures for assessing government revenue responses to economic growth and tax rate changes. It explains how a broad tax base, efficient administration, and optimal rate-setting contribute to revenue growth. Real-world examples including GST, corporate tax cuts, and sin taxes illustrate these concepts effectively.

Key Takeaways

  • Tax buoyancy links revenue growth to economic expansion.
  • Tax elasticity measures how revenue responds to tax rate changes.
  • Real-world examples demonstrate practical applications.
  • Understanding these concepts aids fiscal planning and policy reform.

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