Grants, broadly speaking, are government policies in support of one or more industries, which typically bring a financial benefit to the industry.
At the most conventional level, subsidies are financial transfers to an industry, through payments to workers or companies. No one is likely to deny that a government is subsidizing industry if it pays part of the wages of industry workers or grants companies in the industry funds for capital investment. This is the strictest definition of a grant.
But what is the difference, from the point of view of the industry, between the fact that the government transfers funds to it and the fact that it waives transfer payments, that is, taxes, that the company should normally make? to the government? Suppose that a company starts a specific activity that requires the payment of a business license tax. If the company receives a donation from the government equal to the amount of the tax, there is no doubt that the payment of that subsidy is a subsidy. With this subsidy, the company must pay the tax. Otherwise, the government might not grant any payment, but simply waive the license tax. Both measures (granting the subsidy and exempting the tax) have exactly the same effect on the company, as it does not have to pay the tax with its own money. The exemption is as much a subsidy as the direct subsidy. Therefore, for a government policy to constitute a subsidy, it is not necessary that funds pass directly from the government to workers or companies.
Let’s take an example: a government policy that assists the fishing industry by offering companies a subsidy of 50 percent of the purchase price of a fishing vessel would on the face of it constitute a subsidy for the fishing industry. However, the thing is not so simple. Subsidies are important only for their effects. If the subsidy were accompanied by the condition that the boat must free government money for low income families be built in the country of origin, then the aforementioned subsidy would possibly not be a subsidy to fishing, but rather to the shipbuilding industry, if it could raise its prices in the extent of the grant. In such a case there would be no advantage for fishing. For these reasons, the definition of subsidies, except in cases where it is done in a general way, raises all kinds of controversies, .
The range of possible definitions is wide, from the strict definition “financial assistance provided by a state or public body to run a business or its maintenance” , to the broad meaning of “action (or inaction) of the government that modifies (increasing or decreasing) the potential profits of a company in the short, medium or long term ” . Between the first, which focuses on direct government spending, and the second, which focuses on the effect of a government policy on the expected profits of a company, there is a gulf that can be filled with other possible definitions, which can be placed between both extremes. .
Intergovernmental bodies, such as FAO and OECD, which are organizations with different composition and whose respective members have their own perceptions of their interests, tend to adopt a liberal perspective on subsidies: subsidies are understood as what each member state considers that they are. One result of this guidance is that subsidy studies conducted under the aegis of these agencies, such as the OECD’s Transition to Responsible Fisheries document, discussed later in this document, present inconsistencies between the definitions of subsidies used by different countries. Therefore, it is difficult to make comparisons.
Hardship Grants 