Tax cut in the corporate sector Tax cut might alleviate the financial burden and increase the profit reserve for an enterprise. This can encourage an inefficient enterprise to expand its production line or refine its technology to achieve the economics of scale. However, a tax cut is ineffective to those companies who have achieved the economics of scale or do not foresee an increase in the aggregate demand. Thus, the significance of tax cut is little if the demand is unlikely to increase in future. Therefore, a tax cut policy is only applicable to the food industry and residence industry which are experiencing high demand-pull inflation.