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Governments offer economic development incentives to certain businesses to attract them to the region, including tax credits, grants, and infrastructure support. These incentives are often tied to job creation and capital investment, and may include training grants to improve the local workforce.
Economic development incentives are offered by governments to select categories of businesses based on the perceived value of the business to the region’s economy. For the most part, economic development incentives are offered to companies as a sort of lure, hence “incentive”, to establish the company’s physical position in the jurisdiction. Some of these incentives include tax credits, tax breaks, grants, energy rebates, and tax-raising loans.
Some jurisdictions may offer sales and tax exemptions to companies that are willing to move their physical headquarters to the area. Such companies must also meet other requirements, which may include the creation of a minimum number of jobs, as well as other commitments in the form of capital expenditure. Tax exemptions generally apply to the types of purchases outlined.
Some of the factors that determine the types of companies that are more likely to receive economic development grants are aspects such as the number of jobs the company will create, desired industries such as solar and green energy producers, and competition for the services created by the company. Corporate income tax credits are generally given to those companies which create a certain number of new jobs and which contribute to the economic development of the region in some other form. This may include capital investments, such as building physical business infrastructure.
Other forms of economic development incentives can be in the form of infrastructure grants or soft loans. These financial incentives are granted to some companies for projects. Such efforts may include street lighting and paving or the creation of access roads.
Job creation grants are offered to companies that create a certain number of jobs in the jurisdiction in question. The amount of money depends on the jurisdiction and is also applicable to those companies making capital investments in the community or jurisdiction. This grant can also be awarded at the federal or municipal level.
Training grants are economic development incentives that are offered to companies as partial reimbursement for money spent on salaries and materials used in training new employees. This type of economic development incentive is important, as such training contributes significantly to the economic development of a region. These trained employees improve the quality of the workforce available in the region. Trained employees will also continue to contribute to the development of the region, even if the company folds or relocates.
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