Directions: Read the short passages given below and answer the question that follows it.
Cigarettes constitute a mere 20 per cent of tobacco consumption in India, and fewer than 15 percent of the 200 million tobacco users consume cigarettes. Yet these 15 per cent contribute nearly 90 per cent of the tax revenues to the exchequer from the tobacco sector. The punitive cigarette taxation regime has kept the tax base narrow, and reducing taxes will expand this base.
Which of the following best bolsters the conclusion that reducing duties will expand the tax base?
Explanation:
(b) is the only option that explains how reducing taxes will broaden the tax base. If taxes on cigarettes (which constitute 90% of the revenues) are reduced, the prices of cigarettes will come down, thereby increasing the demand for cigarettes. More the cigarette smokers, the broader the tax base. Options (a) and (c) mention peripheral matters. (d) is talking about increasing duties (taxes) whereas the last sentence of the paragraph has only looked at “reducing taxes”.
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