Fiscal incentives are aspects of fiscal policy that are able to influence and induce the behaviors of people and firms to act in a particular way by offering financial reward for certain activities. Also referred to as tax incentives, these incentives come in a variety of forms and usually involved the reduction or periodic freeze of tax payments.
Some forms of fiscal incentives:
Fiscal incentives are a designed to make certain decisions more desirable to people than they would be otherwise. Fiscal incentives can be used for a variety of reasons, if a government wanted to increase the amount of R&D in a particular field it could offer a tax credit to firms that invest more money in R&D. If a government wanted to encourage households to use cleaner forms of electricity, the government could offer a tax credit or tax refund to encourage households to invest in these technologies such as solar panels or more energy efficient HVAC systems.