Tax incentive

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

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

Many raise the question, are tax incentives an expense or an investment ? Typically, there are more prosecutors who believe that incentives are a tax expense and not an investment for the State. They maintain that such exemptions should not be continually increased. They consider that these resources should be used via national budget, channeled into productive activities.

Others consider such incentives to be an investment, which ultimately promotes economic development. In addition, the tax incentive advocates argue that the government is not a 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, it then grants certain exemptions in the payment of taxes that have to do with related economic activities.

Thus, business people or entities can be encouraged to channel their economic resources to these specific areas. So, although the State has reduced taxes for this activity, the benefits in the long run are for the entire economy in general. As the goal 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 the conduct maintained in their economic activities.

Another form of granting tax incentives came from the classification or type of companies. For example, exemptions to small or micro enterprises.

by Abdullah Sam
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