What is subsidy

• Subsidies are payments, tax breaks, or other forms of economic support given by governments to certain industries or economic sectors. • The goal of subsidies is to aid or support what are deemed to be key parts of the economy or national infrastructure. • While subsidies may have a direct positive impact on the particular industry or companies involved, economists argue that subsidies work against free trade and create market inefficiencies. In this sense, when the government gives subsidies to the supplier, what results is a win-win situation for both the supplier and the consumer. Essentially, the supplier is benefitting as if the good were selling at a higher price and is able to produce more of the product. Meanwhile, consumers get to enjoy the product for what would be a comparatively cheaper price, since suppliers do not need to charge exorbitant rates to break even on production. Tax Credits On the consumer side, government subsidies can help potential consumers with the cost of a good or service, usually through tax credits. For example, a great example of this is the transition to more renewable sources of energy. With still nascent models of green economics, the current demand to purchase new energy-saving technology is low. In order to sway consumer interest, government subsidies or tax credits can help with this high cost of adoption. When consumers refit their houses with solar panels, the government will provide a tax credit to individuals and families to ...

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KUALA LUMPUR: Malaysia’s subsidy restructuring framework will possibly is announced during the tabling of the 2024 Budget this year, said Deputy Finance Minister 1 Datuk Seri Ahmad Maslan. “As you know, Malaysia is moving ahead with targeted subsidy reforms that are intended to save billions annually. Currently, the framework for the implementation of targeted subsidies is 75% complete,” he said in his speech at the Malaysian Institute of Accountants (MIA) international accountants conference 2023 today. “One key challenge will be to formulate a foolproof and effective subsidy mechanism. Another is to plug weaknesses in the proposed subsidy mechanism to prevent leakages and corruption,” he added To do this, Ahmad said the finance ministry would be studying global best practices and observe how developed countries tackle this issue. “Fiscal policy must go hand-in-hand with our efforts to strengthen good financial management, put in cost reductions and plug leakages, and implement systemic and institutional reforms in order to strengthen our resilience, agility and resources to withstand crisis,” he said. “Importantly, the Government must also do a better job of communicating with our stakeholders to enhance credibility, build confidence and trust with the business community and the people,” he added. Meanwhile, he said managing the national debt which has crossed one trillion ringgit is a top priority for the government of today. The annual debt to GDP rat...

• A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut. • In economic theory, subsidies can be used to offset market failures and externalities to achieve greater economic efficiency. • However, critics of subsidies point to problems with calculating optimal subsidies, overcoming unseen costs, and preventing political incentives from making subsidies more burdensome than they are beneficial. How a Subsidy Works A subsidy is generally some form of payment—provided directly or indirectly—to the receiving individual or business entity. Subsidies are generally seen as a privileged type of financial aid, as they lessen an associated burden that was previously levied against the receiver or promote a particular action by providing financial support. Types of Subsidies A subsidy typically supports particular sectors of a nation’s economy. It can assist struggling industries by lowering the burdens placed on them or encourage new developments by providing financial support for the endeavors. Often, these areas are not being effectively supported through the actions of the general economy or may be undercut by activities in rival economies. Direct vs. Indirect Subsidies Direct subsidies are those that involve an actual payment of funds toward a particular individual, group, or industry. Indirect subsidies are those that do not hold a predetermined monetary value or involve actual cash outl...