Business, Legal & Accounting Glossary
A subsidy is an economic term that refers to the financial benefits provided by the government to certain domestic industries or sectors in the form of tax reduction or cash payment. Subsidies reduce the price of the commodities of the industry to a level below their cost of production. A subsidy, therefore, reduces the burden on the industry or sector and is benefits the public in general.
Subsidies were first introduced in England by Thomas Wolsey. This was introduced in 1513 to enable King VIII to pay for the war with France alongside maintaining his opulent lifestyle.
Subsidies are provided by the government to enhance the production of goods and services in a particular industry. It is also provided to promote the widespread use and consumption of the goods and services that are considered meritorious and essential by the government. Subsidies also help to overcome the threats of bankruptcy and unemployment in a declining industry.
Subsidies are provided in various forms such as direct and indirect subsidies, tax subsidies, labour subsidies, regulatory advantages, perverse subsidies, production subsidies, infrastructure subsidies, procurement subsidies, trade protection, consumption subsidies and export subsidies.
A tax break is also a form of subsidy provided by the government. Such breaks in taxes are provided to a certain class of people to enhance consumption.
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This glossary post was last updated: 29th March, 2020 | 0 Views.