'tax-friendly' originates from Modern English as a compound of 'tax' (from Medieval Latin 'taxare', meaning 'to estimate or assess') and 'friendly' (from Old English 'frēondlic', where 'frēond' meant 'friend').

'tax' changed from Latin 'taxare' to Old French 'taxer' and Middle English 'taxen', eventually becoming the modern English word 'tax'. 'Friendly' changed from Old English 'frēondlic' to Middle English 'frendlich' and then modern 'friendly'. These elements combined in Modern English to form the compound 'tax-friendly'.

Initially, 'tax' meant 'to assess or estimate (a levy)' and 'friendly' meant 'like a friend'; over time the compound came to mean 'favourable in matters of taxation' (i.e., likely to reduce tax burden or provide tax benefits).