UK Accounting Glossary
A tax holiday is a temporary reduction or elimination in taxes that governments offer as an incentive to generate business or otherwise achieve some form of economic stimulus. Developing countries often use the tax holiday concept as a development tool. They may implement a general tax holiday on all corporate taxes to attract foreign investment, or implement a tax holiday on selected industries to boost growth in those industries. In the United States, sales taxes are most often the subject of a tax holiday, particularly during a heavy shopping period. For example, governments may augment the back to school sales that stores hold before the start of a new school year with a tax holiday. There may be some limitation on the scope of a tax holiday, however. The tax holiday may target specific kinds of merchandise, such as clothing, school supplies, or computers. Another tax holiday may only apply to merchandise under a specific price point, such as $100. New York State enacted the first tax holiday in 1996.
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This glossary post was last updated: 5th February 2020.