An investment tax credit is a tax incentive provided by governments to encourage businesses to invest in capital goods. It reduces the tax liability of businesses based on a percentage of their investment expenditure.
Imagine you are playing a video game, and the government offers you a special power-up called an "investment tax credit." This power-up allows you to reduce your tax bill by a certain percentage for every investment (upgrade) you make in your virtual business.
Tax Incentive: A tax incentive is any measure that reduces the amount of taxes owed by individuals or businesses as an encouragement for specific behaviors or actions.
Capital Goods: Capital goods are long-lasting assets used in production, such as machinery, equipment, or buildings.
Tax Liability: Tax liability refers to the total amount of taxes owed by an individual or business to the government.
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