Tax Incentives for Foreign Direct Investment in the Tax Systems of Poland, the Netherlands, Belgium and France

The importance of Foreign Direct Investment (FDI) for the Polish
economy in the transition period cannot be underestimated. At present the
main arguments for attraction of FDI stress the importance of stable high
FDI inflows for a sustained economic growth and modernisation of the
Polish economy as it is believed that foreign investment help to increase the
productivity of economic operations and the local workforce, encourage
employment as well as stimulate innovation process and technology
transfer.

The Polish success in attracting FDI in the past seems to come to an end,
as the main driving force for the last few years was the privatisation
process. As the privatisation process in Poland is almost completed a sharp
decline in the FDI inflows in Poland in about two years' time is to be
expected. At the same time tax breaks in the Special Economic Zones
which have attracted a significant volume of foreign investment are to be
scaled back considerably at the end of 2001. Moreover, tax competition
between the Central and Eastern European countries for foreign direct
investment which has been strong in the last decade will become even
more intense in the near future.

Therefore, it seems inevitable for the Polish authorities to introduce
changes in the treatment of the foreign direct investment in the Polish tax
code and turn their focus towards attracting FDI with other means. Poland
should define its position as an attractive location for all multinational
companies which wish to operate in the Central and Eastern Europe.
Interesting tax regulations concerning co-ordination, distribution and service
centres in the Netherlands and Belgium and headquarters and logistics
centres in France may be used in that respect as an example for creating
successful tax regulations in attracting foreign direct investment in Poland.
The paper presents recommendations for the improvement of the Poland's
international location competitiveness for FDI.