Negative Effects of Tax Incentives Towards Foreign Direct Investment: a Hypothetical Report

Executive Summary
The tax incentive policy widespread around the globe in the 1990s due to the belief that attracting multinational firms would create more job opportunities and eventually better off for the whole economy. There have been some evidences that foreign direct investment (FDI) benefited developed countries’ economy. Recently, the Australian government has proposed a new policy that would give fairly large incentives to foreign direct investors. However whether the FDI would benefit Australia’s automobile industry and textile industry, is questionable, and needs to be critically evaluated.
This report has been written by the Manufacturers Association, and it is believed that there would be more disadvantages than advantages to Australian economy, especially automobile industry and textile industry. Giving incentives to FDI only helps to destroy small business sectors, and will have a negative impact on the government’s revenue. For the future growth of the industry and businesses, revising the government’s proposal will be important.
The Manufacturers Association suggests three main ideas towards the new policy, and the recommendation for the government is as follows.
The government should establish and improve laws that are relating to market's assessment, regulations and the standard system as soon as possible.
The government should carry out some policies to ensure market competitiveness.
The government should play a catalytic role in corporate mergers.

Introduction
This report has been written by the manufacturers association due to a new government policy proposal that was introduced lately. The new proposal states that the government will give significant tax incentives to foreign investors who are prepared to invest in expanding the nation’s manufacturing base in automotive and textile industries. However, there may be some problems that might arise with this new proposal. Thus the objectives of this report are to critically evaluate advantages

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