T~e Effect of Tax. Holida.y on Investment DecisioQs.Some Comments

Abdul Razzaq Kemal

The Pakistan Development Review, 1975, vol. 14, issue 2, 245-248

Abstract: In the Winter 1974 issue of the Pakistan Del'e/opment RevicII'. Messrs: Azhar and' Sharif have published an article entitled "The Effects of Tax Holiday on Investment Decisions. An Empirical Analysis." It was an interesting article in a very useful area of research. Apart from other subsidies, tax holidays are granted to encourage investment generally, but in certain areas particularly. Thus a study on tax holiday is important from the policy point of view as it helps decide whether to reintroduce the tax holiday policy which was abolished in 1972. Unfortunately, there are some conceptual and methodological problems in the study so that the results presented by Azhar and Sharif are rather suspect. However, before taking up these problems, let it be pointed out that the conclusions drawn by Azhar and Sharif regarding ineffectiveness of the tax holiday policy in encouraging private investm(mt is not quite correct. Their study showed tha~ 20 percent or firms. would not have invested if they had not been granted tax holydays.

Date: 1975
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