Many governments develop tax incentives to help stimulate investment to support the achievement of national policy objectives. Companies that utilise these incentives will often receive a reduction in their tax liabilities over the longer term as a result of their decision to invest in this way.
For example, in 2016, as part of measures designed to boost the economy, the Portuguese government offered a tax incentive to encourage the capitalisation of company assets. In order to take advantage of this incentive, companies had to pay an additional amount of tax upfront and this additional payment of tax allowed certain assets used in commercial, industrial or agricultural activities to be revalued and subsequently written off against our profits. Vodafone Portugal responded to this incentive and made upfront tax payments over three instalments from December 2016 to December 2018, and as a result, was able to deduct an additional amount for depreciation from the 2018 financial year.