Question

Why does Goverment go for emortization ?

course: business and government

Answer 1

Solution –

Government has over the years affected business by its tax and regulatory policies. All governments have an agenda of welfare which it ties up with the businesses. The government uses amortization as a tool to allow for tax incentives. Over the years it has been a practice by businesses to reduce their taxes by going in for amortization of certain debt expenses and certain intangible assets so as to convert these into expenses and use for reducing their income and in a way reduce the tax liability.

The government allows certain industries to use amortization which for example provide for waste management or are environment friendly. Industries that promote local business industries are also allowed to use amortization for certain categories. In a way amortization can be used as a tool to promote businesses which are in line with the vision of the government.