Tax Incentives: What They Are And What They Do?

The tax incentives were introduced in the 1980s, in response to the oil crisis in the 1970s. These tax incentives were devised to encourage investments in a way that the capital gains do not face many taxes. And from that time till now, tax incentives have been playing a huge role in economic growth and can bring opportunities for the cities if they strategize their businesses with the right approach.

At the time of the Covid-19 pandemic, the budget for the municipal government was triggered and from that time till now, there was a great need for tax incentive experts who helped to support racial goals, growth, and fiscal health.

Tax incentives work effectively, but knowing the facts related to the definition and benefits tax of incentives availed by individuals and the economy of the cities are most important to be discussed.

What Are Tax Incentives?

Tax incentives are a popular tool to stimulate economic development and maintain jobs. The purpose of tax incentives is to attract new businesses, along with offering assistance to retain new ones in the cities, states, or countries.

Tax intensives can be in the form of tax credits, tax abatements, or exemptions from taxes altogether – They can also include tax-free zones for certain industries like manufacturing, research, and development.

Moreover, the government encourages people to spend or save money by reducing the amount of taxes they have to pay through tax intensives; since the purpose of tax intensive is that if the tax is lower, people will be more inclined to spend and less inclined to save.

The reason why tax incentives are given by the government to individuals and businesses is that the government plans to increase productivity and economic growth by discouraging firms from informal shifts of sector, or evasion-prone activities.

A tested result of incentive taxation was seen in the countries like Korea, Malaysia, Mauritius, Ireland, Taiwan, and Singapore – And once applied this in the economy, rapid growth was measured.

The effectiveness of tax incentives is dependent on the country and the industry. For example in China, there are not many investments seen because of the high tax rates.

Furthermore, tax incentives are a way to attract investments by offering tax breaks and other benefits such as the ability to minimize losses.

Your tax incentive experts will make sure to present tax incentives effectively because from here the investors will make decisions on their investment and why they should invest in such industry, business, or field.

Different Types Of Tax Incentives

Tax incentives can be defined in different types because every field has a different tax policy that needs to be followed in order to maintain the rules and regulations of the government.

Tax incentives vary on the type of fields such as employment, industries, and businesses which can result in growth benefits for the city, state, or country.

  • Tax Incentive For Employees

Tax incentives are a form of tax relief that can be given to employers. They are designed to encourage employers to make changes to their business or provide training for their employees. 

It can be said that tax incentives for employees are the monetary rewards, awarded to companies for encouraging them towards hiring new employees for the company. 

The size of the incentive will depend on the company’s size which includes: 

  • Training allowance
  • Employer’s national insurance contribution (NIC)
  • Small and medium sized enterprises 
  • Apprenticeships 
  • For employees who are disabled
  • Tax Incentives for the businesses 

Tax incentive experts say that businesses are granted several tax incentive programs resulting in benefits for the business itself, as well as for the government that wishes to locate businesses in local areas and boost growth. 

Some business assistance programs that are advantageous for the companies are as follows:

  • Tax breaks 
  • Granting cash
  • Providing free land
  • Free job training

Benefits Of Tax Incentives

Some benefits of Tax Incentives are:

  • Tax incentives do not focus on the marketplace, it rather works for the private sector recipients who have the ability to use these incentives productively 
  • Tax incentives do not have much paperwork as compared to other taxations 
  • The tax incentive eliminates the need to directly assist individual firms 
  • A psychological advantage of tax incentives is to achieve a favorable reaction from the industry
  • Another benefit of tax incentives is that it is a permanent process that does not need any annual budget review 
  • The political feasibility of tax incentives is very high
  • Many countries around the world are increasingly using it as part of their policy mix to stimulate private R&D


Knowing the answer to what tax incentives are is not so easy until you connect yourself with a tax incentive expert who guides you to the terms and policies this tool provides and how you can receive benefits from tax incentives.

Bottomline Tax is one of the best taxation companies in the USA, offering exceptional custom tax solutions to help you solve your taxation matters and will appear to be your best guide in Tax incentives.