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The following graph indicates the composition of our tax revenue for a period of two decades: With reference to the above graph, which of the following is/are the most logical and rational inference/inferences that can be made? 1. During the given period, the revenue from Direct Taxer as percentage of gross tax revenue has increased while that of Indirect Taxes decreased.  2. The trend in the revenue from Excise Duty demonstrates that the growth of manufacturing vector has been negative during the given period.  Select the correct answer using the code given below. 

The following graph indicates the composition of our tax revenue for a period of two decades: With reference to the above graph, which of the following is/are the most logical and rational inference/inferences that can be made? 1. During the given period, the revenue from Direct Taxer as percentage of gross tax revenue has increased while that of Indirect Taxes decreased.  2. The trend in the revenue from Excise Duty demonstrates that the growth of manufacturing vector has been negative during the given period.  Select the correct answer using the code given below.  Correct Answer 1 only

Concepts used:

Indirect taxes' revenue consists of Excise, Customs and Service tax revenue.

Direct Taxes' revenue consists of Corporate and Personal Income tax revenues. 

Calculation:

Indirect taxes' revenue consists of Excise, Customs and Service tax revenue.

⇒ Tax revenue from Indirect taxes = Revenue from Excise + Customs + Service tax

Direct Taxes' revenue consists of Corporate and Personal Income tax revenues. 

⇒ Tax revenue from Direct taxes = Revenue from Corporate tax + Personal income tax

As excise and customs tax revenue is falling from 1990 to 2011 while service tax revenue is rising but the amount is very small, it can be inferred that Indirect taxes as a percentage of total tax revenue are falling over time. 

On the other hand, both Personal income tax and Corporate Tax revenues are rising and Corporate tax revenues are the highest over the most of the period, it can be inferred that Direct tax revenue as a percentage of total tax revenue has fallen during the given period.

As information about the contribution of various sectors of economy - agriculture, manufacturing and service sector towards any individual tax revenue or total tax revenues is not given, any inference about the growth rate of any sector cannot be done.

∴ Only statement 1 is correct.

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