Fiscal incentive

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.[1] 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.[2]

Some forms of fiscal incentives:

Fiscal incentives are a designed to make certain decisions more desirable to people than they would be otherwise.[3] 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.

See Also


  1. J.Black, N. Hashimzade, and G. Myles. (2009) "Fiscal Policy." [Online], Available:, 2009 [Aug 22, 2016]
  2. Verbruggen, A., W. Moomaw, J. Nyboer, 2011: Annex I: Glossary, Acronyms, Chemical Symbols and Prefixes. In IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation [O. Edenhofer, R. Pichs- Madruga, Y. Sokona, K. Seyboth, P. Matschoss, S. Kadner, T. Zwickel, P. Eickemeier, G. Hansen, S. Schlömer, C. von Stechow (eds)], Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
  3. H. Kerr, K. McKenzie and J. Mintz. Tax Policy in Canada. Toronto: Canadian Tax Foundation, 2012, pp.10:26.

Authors and Editors

Lyndon G., Jason Donev
Last updated: September 17, 2016
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