Tax incentive

economic-dictionary

The tax incentive constitutes a stimulus by the State, which is manifested as a reduction in the payment of a certain tax.

The tax incentive can be applied in the form of a percentage or a fixed amount of the total tax payable. Or it can be a tax credit, to be deductible to future payments.

Many ask the question, are tax incentives an expense or an investment? What is typical of the case is that more tax experts consider that the incentives are a tax expense and not an investment for the State. They argue that such exemptions should not be continually increased. They consider that these resources should be used via the national budget, channeled into productive activities.

Others view such incentives as an investment, ultimately promoting economic development. In addition, advocates of the tax incentive argue that the government is no better investor than the private sector.

Nature of the tax incentive

When the State considers that certain economic activities are fundamental for the development of the economy, then it grants certain exemptions in the payment of taxes that have to do with the related economic activities.

Thus, people or business entities can be encouraged to channel their financial resources to these specific areas. So, although the State has reduced the taxes for this activity, the benefits in the long run are for the entire economy in general. As the end pursued by the State is the common good, it becomes clear that it is acting correctly.

It should be noted that such tax incentives are not granted solely for the issues outlined above. So the State can also grant tax exemptions for other reasons. Thus, the State may grant exemptions to certain taxpayers for their conduct in their economic activities.

Another form of granting tax incentives came from the classification or typology of the companies. For example, exemptions for small or micro businesses.

Tags:  Commerce banks other 

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