Investment incentive is a government-implemented incentive policy aimed to encourage investors into its domestic market or to promote expansion of existing businesses.
[1] Investment incentives encompass creating an environment that enables foreign businesses to operate profitably and decreases risks.
[3] The incentives take form of "direct subsidies (investment grants) or corporate income tax credits (investment credit) that compensates the investors for their capital costs".
[4] Scholars generally consider investment incentives to be inefficient, economically costly, and distortionary.
[5] In South Korea and Taiwan, over one-half of all foreign subsidiaries benefit from some form of investment incentive, which is more than most other developed countries (Japan 9%, Switzerland 12%, Canada and France 18%, Germany 20%, Belgium 26%, Italy 29%, UK 32%, Australia 37%).