What are tax reductions or exemptions given to enterprises in certain industries called?

• A. Tax deductions
• B. Tax incentives
• C. Tax credits
• D. Tax allowances

Answer: (B)

The term used to describe tax reductions or exemptions granted to enterprises in specific industries is known as tax incentives. Tax incentives are designed to encourage investment and growth in particular sectors by making it financially advantageous for companies to operate within those industries. Governments implement these incentives to stimulate economic activity, create jobs, or foster innovation and development in target areas.

Tax deductions, while related to reducing taxable income, refer more broadly to expenses that businesses can subtract from their income before calculating tax owed, rather than incentives specific to certain industries. Tax credits provide a direct reduction in tax liability, usually given for specific actions or expenses, and tax allowances are generally associated with limits on personal expenses or specific kinds of deductions. Thus, tax incentives specifically focus on encouraging enterprise activity in desired sectors through favorable tax treatment.