Definition of Tax holiday:
A tax holiday is a government incentive program that offers a tax reduction or elimination to businesses. Tax holidays are often used to reduce sales taxes by local governments, but they are also commonly used by governments in developing countries to help stimulate foreign investment.
A temporary period, during which time the government removes certain taxes (usually sales tax) on certain items, in order to encourage the consumption or purchase of these items. The most common application of this is a tax-free weekend, which most states hold shortly before school begins in the fall, during which time sales tax is removed on clothing, school supplies, and/or other similar items. Not all areas engage in tax holidays; it is up to the government of that area.
When a government body wants to encourage the purchase of certain items or bolster participation in certain activities, it may issue a tax holiday, a temporary period during which the tax rate applied to certain products or services is reduced or removed. For instance, many local governments have a sales tax holiday the weekend before school resumes in the fall to reduce the cost burden that parents carry when shopping for their children’s school supplies or clothing. Sales tax holidays, like the back-to-school one described, are a common type of tax holiday administered by state governments. Researchers found that on sales tax holidays, households increase the quantities of clothing and shoes bought by over 49% and 45%, respectively, compared to what they usually buy during that timeframe.
How to use Tax holiday in a sentence?
- Tax holidays are instituted by local governments and governments in developing countries to help stimulate foreign investment.
- A tax holiday is a governmental incentive that reduces or eliminates taxes on businesses.
- A tax holiday can encourage economic activity and foster growth.
- Tax holidays are believed to increase long-term tax revenue because they help businesses maintain or grow operations, which creates more taxable revenue for the tax authority.
Meaning of Tax holiday & Tax holiday Definition