Open AccessThe Effect of Tax Holiday on Investment Decisions: Some Comments
Author(s) -
A. R. Kemal
Publication year - 1975
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v14i2pp.245-248
Subject(s) - investment (military) , subsidy , tax policy , suspect , economics , point (geometry) , public economics , tax reform , market economy , political science , law , politics , geometry , mathematics
In the Winter 1974 issue of the Pakistan Development Review,Messrs: Azhar and Sharif have published an article entitled "The Effectsof Tax Holiday on Invest¬ment Decisions: An Empirical Analysis." It wasan interesting article in a very useful area of research. Apart fromother subsidies, tax holidays are granted to encourage investmentgenerally, but in certain areas particularly. Thus a study -on taxholiday is important from the policy point of view as it helps decidewhether to reintroduce the tax holiday policy which was abolished in1972. Unfortunately, there are some conceptual and methodologicalproblems in the study so that the results presented by Azhar and Sharifare rather suspect. However, before taking up these problems, let it bepointed out that the conclusions drawn by Azhar and Sharif regardingineffectiveness of the tax holiday policy in encouraging privateinvestment is not quite correct. Their study showed that 20 percent offirms would not have invested if they had not been granted tax holidays.A policy which en¬courages investment by 20 percent cannot be calledineffective. Before drawing any such conclusions, one is advised to lookat the relative effectivenesses of different investment-promotingpolicies.