Question

Which of the following measures is/are likely to increase the taxation base of the country?

1. An optimum taxation rate

2. Demonetization of currency periodically

3. Promoting cashless transactions

Select the correct answer using the code given below.

1. 2 and 3 only
2. 1 and 2 only
3. 1 only
4.  1, 2 and 3

Answer 1

Correct Answer - Option 4 :  1, 2 and 3

The correct answer is 1, 2 and 3.

• Standard economic theory suggests taxation rates should not be too high.
• An optimum tax rate ensures voluntary compliance. Hence statement 1 is correct.
• Demonetization is a tool to create deterrence against black money, thus increasing the taxation base. Hence statement 2 is correct.
• Digital transactions create a trail of money and hence bring economic activity into the taxation fold. Hence statement 3 is correct.