Revenue neutrality

Tax Glossary Definition

Revenue neutrality

Revenue neutrality refers to a tax policy approach where reforms are designed so that the total amount of money collected by the government remains roughly unchanged. In such a system, reductions in certain taxes are balanced by increases in others, keeping the government’s overall fiscal position stable.

Example: Suppose the government cuts income tax rates but raises indirect taxes such as excise duties to make up for the loss. Because the total revenue collected remains constant, the change would be described as revenue neutral.

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