Why might a developing country offer a tax holiday?

Question

Quizplus · Accepted Answer

A tax holiday can serve as an incentive for both domestic and foreign businesses to set up shop or invest in a developing country. This can lead to job creation, an increased flow of foreign direct investment, and expansion of foreign trade. Therefore, all of the above options - job creation, foreign investment, and foreign trade - are reasons why a developing country might offer a tax holiday.

Why Might a Developing Country Offer a Tax Holiday