Tax Holiday

A tax holiday is a temporary reduction or elimination of a tax. Programs may be referred to as tax abatements, tax subsidies, tax holidays, or tax reduction programs. Governments usually create tax holidays as incentives for business investment. Tax holidays have been granted by governments at national, sub-national, and local levels, and have included income, property, sales, VAT, and other taxes. Some tax holidays are extra statutory concessions, where governing bodies grant reduction in tax not necessarily authorized within the law. In developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting Foreign Direct Investment or stimulating growth in selected industries.

Tax holiday stimulate community revitalization, retain City residents, attract homeowners to the City, and to reduce development costs for home-ownership and rental projects. The program provides a benefit for residents who improve their homes and encourages home shoppers to buy in the City. The tax abatement benefits stay with the property the entire length of the abatement and will transfer to any new property owner within that period.

A tax holiday may be given in respect of particular activities, in particular areas with a view to develop that area of business, or to particular taxpayers. Researchers found that on sales tax holidays, households increase the number of clothing and shoes bought by over 49 percent and 45 percent, respectively, relative to what they buy on average.