Many programs exist that allow individuals, businesses, corporations, companies, or other parties that qualify, a tax reduction or exemption. Such programs refer to tax abatement, also known colloquially as tax holiday. Tax abatement provides an easing of tax obligations of taxpayers, and may be obtained if one qualifies for the criteria of specific tax abatement.
Tax abatement or tax holiday is often a program or offer made by the government in order to create an impetus for businesses to invest. This is usually done by governments reducing or eliminating certain forms of taxes such as sales tax. In developing states, governments more often than not provide tax abatement when it comes to corporate taxes in order to stimulate the growth of foreign investments. Thus, the goal of most governments when providing tax abatement is to develop the economic viability of a certain area or industry.
Tax abatements may also apply to homeowners whose homes or other properties may have decreased significantly in value. It is in the interest of such homeowners to apply for tax abatement that may significantly reduce or eliminate the amount of property taxes they may have to pay. People who have recently undergone some form of hardship may qualify for this tax abatement. The reasoning behind this tax abatement for homeowners is that they should not have to pay so high for properties they own that have not been damaged by them.
The main purpose of tax abatement is to provide an incentive for consumers to change their behavior. This is done especially when government cannot change consumer behavior through legislation.