Discussion
In calculating the buoyancy of a tax, we consider
Answer: C
In calculating the buoyancy of a tax we consider both automatic changes and discretionary changes. Buoyancy is the ratio of the percentage change in tax revenue to the percentage change in national income, and it counts every change in revenue, whether it comes from the automatic response of the tax base to income or from deliberate changes in rates and coverage. The elasticity of a tax, by contrast, covers only the automatic changes. So options A, B and D are wrong and the keyed answer is both, option C.
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