Tax holiday
The term represents a type of a tax incentive usually issued by governments in order to stimulate investment in a particular area. Tax holidays refer to temporary tax reductions.
When a government seeks to promote consumer spending or encourage business investment, it can implement a tax holiday, which refers to a temporary duration when specific taxes are decreased or completely waived.
Tax relief can be offered through tax concessions to ensure the attraction of new businesses or the preservation of current ones. Governments, at various levels, have granted tax holidays encompassing different types of taxes such as:
- Income Tax
- Property Tax
- Sales Tax
- Value Added Tax (VAT), among others.
Some tax holidays are non-legislated concessions, wherein governing bodies provide a tax reduction that may not be explicitly authorised by the law. In emerging economies, governments occasionally decrease or abolish corporate taxes with the aim of enticing foreign direct investment or fostering growth in specific sectors.
Tax holidays can also be implemented to counterbalance the impact of market-driven price hikes, such as the instance of gas tax holidays introduced by certain states and supported by President Joseph Biden in 2022, in response to significant increases in fuel prices.
