Question

"Reduction in rate of taxation leads to more than proportionate increase in tax yield". This law is known as 

Options

• Giffins Effect

• Laffer Effect

• Gresham's Law

• None of the above

Answer 1

"Reduction in rate of taxation leads to more than proportionate increase in tax yield". This law is known as Laffer Effect

Explanation:
In economics, the Laffer curve is a representation of the relationship between rates of taxation and the resulting levels of government revenue. Proponents of the Laffer curve claim that it illustrates the conce pt of taxable income elasticity i.e. taxable income will change in response to changes in the rate of taxation.