Buoyancy is a basic principle of taxation which means: A. The system should be such that cost of collection is least B. Tax obligation of the payers should be well determined C. The system should be such that the tax revenue has the inherent tendency to increase as the economy grows D. Tax base should be fairly diversified so that the tax burden is widely spread Choose the correct answer from the options given below:?

Option 3 : C only

The correct answer is C only.

Tax Buoyancy -The relationship between variations in the growth of tax revenues collected by the government and changes in GDP is explained by tax buoyancy.

Features of Tax Buoyancy -

• It speaks to how well tax revenue growth responds to changes in GDP.
• A tax's revenue rises without the tax rate being raised when it is buoyant.
• One of the most important metrics for evaluating the effectiveness of a government's tax system is tax buoyancy.
• In general, the government's tax revenue increases as the economy experiences quicker growth.
• In other words, it measures the responsiveness of tax mobilisation to economic growth.
• Tax buoyancy depends largely on -
  • The size of the tax base
  • The friendliness of the tax administration
  • The reasonableness and simplicity of the tax rates