Finance Minister: Last year was disastrous for our manufacturing

Question

Finance Minister: Last year was disastrous for our manufacturing sector, which has traditionally contributed about 75% of our national budget. It is therefore encouraging that there is evidence that the IT sector is growing stronger. Taxes from the IT sector accounted for 15% of our national budget, up from 8% last year.

On the basis of the statements above, what best supports the above conclusion?
A The increase in taxes from the IT sector could have merely been the result of new laws imposed on the IT sector. 
B The profits of the IT sector remained at a steady level despite the fact that it paid more taxes to the national government. 
C The rise in the percentage of taxes that the IT sector contributed to the national government was insignificant in actual dollar terms. 
D It is difficult to determine whether the jump from 8-15% tax contribution by the IT sector will be ongoing. 
E The information given above does not fairly compare the contribution of taxes paid by different industries to the national government.

devikeerthansr · Answer

Please explain why B is correct

mahu101 · Answer

Minister claims (the conclusion) that paying higher tax is a sign of growth but we need to also ensure that they have the same or higher profit levels to actually claim that they have growth.

Taxes eat into your profits. Option B states that though the IT companies paid higher taxes, their their profit levels were steady.
If they paid higher taxes yet had positive profits then their revenues(or earnings) were higher. We can conclude that they were growing and earning more. despite the fact that they paid more taxes they still had enough (positive steady profits).

Ravindra.here · Answer

FIRST OF ALL, this is a strengthen question, not an assumption 
 Lets do some maths before solving this
lets's say 
earlier TOTAL taxes(T.t.) = 100
TAXES FROM MANUFACTURING (M.T)=75 ((given 75 percent
TAXES FROM IT (IT)= 8 (( given 8 percent
Taxes from others= 23 (( 23 percent

last year M.T was disastrous let's assume 59 percent contribution
I.T = 18 percent contribution 
others = 23 percent 
now there can be two cases here.
CASE 1 REVENUE WAS SAME AS OLD YEAR AND THE TAXES FROM MANUFACTURING DECREASED AND I.T. INCREASED.
T.R.=100
T.M.= 59 $(( DECREASED TAXES))
TAXES FROM IT=18$
AND OTHERS =23$
NOW ,we have to assume that the increased taxes are from increased revenue from IT sector, which is growth in It sector and not an undue burden from government of taxes on IT sector. Therefore, profits are either incresing or at steady levels. option b says that.

Case 2 REVENUE from taxes decreased = 55 (( HERE TAXES FROM IT ARE SAME AS PREVIOUS YEAR THAT IS 8$
AND MANUFACTURING TAXES HAVE DECREASED))
TAXES FROM IT=8$
TAXES FROM MANUFACTURING ((51 PERCENT ASSUMED))= 28$
OTHERS (23%)= 19$
now here 8$ is 15 percent total revenue =55
this signifies that nothing in I,T, sector has changed 
 the revenues have decreased and that's why the 8 percent contribution in taxes by I.T sector amounts to 15 percents
this clearly means that the profits of I.T. level are at a steady level, because nothing has changed for I.T. sector
THEREFORE, b is a clear winner here

as far as other options are concerned
a) out of scope
c) reverse answer. classic weakener
d) no tie to the conclusion answer
e) again no tie to the conclusion

obiwankanobi · Answer

What is the source of this question?

rishabhdxt · Answer

Experts pls help .

Can get , why option B is correct ?

bluetrain · Answer

(B) The profits of the IT sector remained at a steady level despite the fact that it paid more taxes to the national government.

in the condition that "Taxes from the IT sector accounted for 15% of our national budget, up from 8% last year", if the profits of the IT sector remained at a steady level, we can conclude that "IT sector is growing stronger"

devikeerthansr · Answer

Right. Taxes eat into your profits. Option B states that though the IT companies paid higher taxes, their their profit levels were steady.
If they paid higher taxes yet had positive profits then they were growing.

Doer01 · Answer

Hi,
 Argument is pretty straight forward. Tax contribution of IT industry has increased from 8% to 15% where as that of manufacturing has declined. Based on this observation, FM concludes that IT industry has grown stronger.
Question stem asks to strengthen FM's idea/conclusion.

Pre-think:  Since the figures are given in percentage, any option that could show that the actual number is also greater than it was last year would support the FMs conclusion.

Answer choices A,C,D & E are quite easy to reject as none of them talk about the acutual amount contributed by IT industry.
Answer choice B says that even though the profits for IT remained constant, their tax contribution increased.

B The profits of the IT sector remained at a steady level  despite the fact that it paid more taxes to the national government.

Info in bold is enough to support FM's conclusion.

chrtpmdr · Answer

I quite frankly dont get this question. Question stem is about "budget contribution", not taxes paid. How should we infer that the IT sector paid more taxes - for that we would need to asume that the budget remained the same.

Example:

Corp A pays 50$ taxes 
Corp B pays 25$ taxes
Corp C pays 25$ taxes

Sum of taxes paid = National Budget

Now, if Corp A is going through crisis, it will only be able to contribute 30$ in taxes. Thus the new budget is 30+25+25 = 80$ 
The share of the budget of Corp B before the crisis was 25/100 = 25% and now is 25/80 = 31.25%

Thus the share of the budget has increased even though the industry hasn't witnessed any growth.

Gokul20 · Answer

Conclusion: IT sector is growing
Support: It paid more Taxes than the previous year to the Govt.
Gap: The argument assumes that More Taxes -> Growth. 
Ask: Strengthen the argument

This statement  weakens  the argument. If the increase in Taxes was merely because of the new laws, then there is no growth in the IT sector
 A is out 
 
Profits remained steady despite the fact that the sector paid more taxes. For this to happen the Revenue generated was more than the previous year. This supports that the IT sector did grow
 Keep B 
 
Whether the tax was significant or insignificant does not matter. What matters is whether more taxes corresponds to growth.  Irrelevant. 
 C is out 
 
We are not thinking about the present here.  Irrelevant/Out of Scope 
 D is out 
 
Not concerned about other industries. Focus is on IT sector.  Irrelevant/Out of Scope 
 E is out

B is our answer

Foreheadson · Answer

thanks for the question, but the question, last part, is poorly phrased. it is dubious.

Posted from my mobile device

princeann · Answer

Premise:  
1.Manufacturing sector is suffering a decline, for taxes contributing to national budget declined. 
2. Taxes from IT sector to the percentage of national budget increase from 8% to 15%.

Conclusion:  
Taxes budget to national increase => IT section is growing much stronger

We need find an argument to support the conclusion. Before going to answer choices, what I have in mind is : profits of IT sector must NOT decrease. If it sacrifice profits to pay more taxes, it wouldn't indicate the IT sector is going stronger. it's just the IT now pays more taxes.

A) weaken the conclusion. It indicates the increased percentage is merely just new laws. Not for the reason that IT is growing strong.
B) Correct. If profits did not decrease or remained steadily, meaning IT sector did not sacrifice its profit to contribute on taxes. Hence, it strengthens the conclusion that IT is growing stronger. 
C) weaken the conclusion. Indicating that percentage doesn’t necessarily equal actual dollar. 
D) irrelevant. whether IT will be continued to grow in the future doesn’t matter. 
E) out of scope. Compare IT with other industries.

ravigupta2912 · Answer

Not very convinced with the OA.

The minister's conclusion is that "IT sector grew stronger". He backs his claims with evidence of rise in % contribution of taxes by the IT sector.

B says that the profits of IT sector remained steady --- If mfg is falling and other sector is steady, then, its share in taxes will ofc rise but does that mean that the former sector is growing? NO.

C says that rise in % taxes is insignificant in dollar terms - IMO correct answer since it eliminates the possibility that taxes of IT sector also declined albeit at a slower rate than mfg sector. This choice says that rise translated into a small  increase  in actual dollar taxes paid. So we have some evidence that there has been growth. Evidence that we cannot refute.

Not v. convinced with B.

Freaty · Answer

Very poorly phrased question.

VerbalBot · Answer

Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.

Finance Minister: Last year was disastrous for our manufacturing

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Finance Minister: Last year was disastrous for our manufacturing

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards