Estimation of tax buoyancies for major Indian states
Student name: Ms Manika Gupta
Guide: Dr Subir Sen
Year of completion: 2012
Host Organisation: Ministry of Corporate Affairs, New Delhi
Supervisor (Host Organisation): Mrs Sibani Swain
Abstract: Taxes form a major source of revenue and their responsiveness to the changing macroeconomic
conditions has been a topic of discussion in the world of literature for a long time now. Tax
buoyancy tells us the responsiveness of tax revenue to the changing tax base. This information is
an essential component for proper planning with respect to taxes and subsequent policy
formation in the long run. Also, it indicates the level of resources available to the government to
fund its social-economic activities. This paper estimates tax buoyancies for 14 states of India
with respect to the states’ own tax revenues, using time series data for the period 1980-1981 to
2009-2010. The analysis indicates that the buoyancies for most of the low per capita income
states have on an average increased. This points to the fact that built-in tax system has been
effective and the tax revenue changes have kept pace with changing income base. Value of tax
buoyancy and hence tax revenue can be improved if greater tax compliance is exercised by the
tax authorities and efficient tax administration is facilitated by the state governments.
