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Which of the following canons of taxation indicates that the tax revenue should have an inherent…

In the study of canons of taxation, the "Canon of buoyancy" states that a tax system should have an inherent tendency for tax revenue to grow automatically as national…

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Which of the following canons of taxation indicates that the tax revenue should have an inherent tendency to increase along with an increase in national income, even if the rates and coverage of taxes are not revised ?

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Answer and explanation

Correct answer C

In the study of canons of taxation, the "Canon of buoyancy" states that a tax system should have an inherent tendency for tax revenue to grow automatically as national income increases, even when tax rates and coverage are kept unchanged. By contrast, C. F. Bastable's classical "Canon of elasticity" refers to the government's ability to raise additional revenue when needed by revising tax rates or coverage, "Canon of flexibility" refers to the ease of modifying the tax structure without legal rigidity, and "Canon of productivity" requires taxes to yield adequate revenue.

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