In countries with well-developed tax systems, subsidies provided by reducing companies' tax burdens are commonplace. Examples include tax exemptions (when a tax is not paid), tax credits (which reduce a tax otherwise due), tax deferrals (which delay the payment of a tax) and a host of other instruments. In common language these preferential tax treatments are called tax breaks or tax concessions; public-finance economists refer to them as tax expenditures. They should not, however, be confused with general tax reductions.
Generally, when a government provides a tax break its budget is affected in much the same way as if it had spent some of its own money. The exception is a tax credit, which is worth more to a corporate recipient (and costs a government more) than a direct payment of an equivalent nominal value, as a direct payment raises a company's taxable income and therefore is itself taxable.
Besides adding complexity to tax systems, tax concessions are often criticized by economists as being less transparent than grants, and more resistant to change. Several national governments, and even a few sub-national governments, produce annual tax expenditure budgets. But the information contained in these "budgets" is often reported at a highly aggregate level. Information on the value of tax breaks received by particular industries or companies is usually much more difficult to find.
When creating a new tax break, lawmakers sometimes set a limit on how long it may be used. But many tax breaks, once incorporated into the tax code, continue indefinitely. In contrast with a grant or similar subsidy, which has to be re-approved with each budget cycle, a tax break requires an active decision by lawmakers to eliminate it.
