200Policy Brief - OECD

OECD 2008 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Policy BriefFEBRUARY 2008 Tax Effects on Foreign Direct InvestmentIntroductionVirtually all governments are keen to attract foreign direct investment (FDI). It can generate new jobs, bring in new technologies and, more generally, promote growth and employment. The resulting net increase in domestic income is shared with government through taxation of wages and profits of foreign-owned companies, and possibly other taxes on business ( property tax). FDI may also positively affect domestic income through spillover effects such as the introduction of new technologies and the enhancement of human capital (skills). Given these potential benefits, policy makers continually re-examine their tax rules to ensure they are attractive to inbound investment . Tax policies may also support direct investment abroad, as outbound investment may provide efficient access to foreign markets and production scale economies, leading to increased net domestic the same time, governments continually balance the desire to offer a competitive tax environment for FDI, with the need to ensure that an appropriate share of domestic tax is collected from while tax is recognized as being an important factor in decisions on wher

4 © OECD 2008 Policy Brief TAX EFFECTS ON FOREIGN DIRECT INVESTMENT payroll taxes and non-profit-related business taxes are increasingly under the

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