Governments usually create tax holidays as incentives for business investment, although the arrangement has also been characterized as a form of corporate welfare that leads to a redistribution of resources away from smaller businesses and private citizens and towards monopolies and other forms of consolidated wealth.
In developing countries, governments sometimes reduce or eliminate corporate taxes for the purpose of attracting foreign direct investment or stimulating growth in selected industries.
[4] Researchers found that on sales tax holidays, households increase the quantities of clothing and shoes bought by over 49% and 45%, respectively, relative to what they buy on average.
It commonly takes the form of tax-free weekend lasting Friday through Sunday, usually during a major shopping period for necessities, such as just before school starts.
During that period, sales tax is not collected on selected items, such as clothing and school supplies.