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What does tax buoyancy indicate and how does it impact tax devolution?

Poor responsiveness of tax collection to economic growth poses new challenges for norms on sharing taxes with the states

A K Bhattacharya 

A K Bhattacharya

The highest tax buoyancy rate for the Union government during the last 28 years after economic reforms was achieved in 2002-03. Tax buoyancy that year had risen to 2, which meant that the Centre’s gross tax revenues had grown at double the rate at which the Indian economy had grown in nominal terms. The finance minister under whose watch such a high level of tax buoyancy was recorded was Yashwant Sinha.

Tax buoyancy is one of the key indicators to assess the efficiency of a government’s tax system. It measures the responsiveness of tax mobilisation to economic growth. Tax ...

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First Published: Sun, November 24 2019. 20:22 IST
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