Business Taxation and Investment Incentives: Focused on East Asian Countries
Authors:   Asia-Europe Perspective Association, Oh Moon-Sok , Lim Han-Ja 
Published: June 2018

Companies are expanding their businesses through outward direct investments and many countries in the world are using these corporate activities and trying to attract foreign capital to develop their industry. So Korea's company's outward direct investments and foreign investments that are flowing into Korea is getting bigger.
But the host country that are trying to receive the foreign investments is taking a serious view in tax incentive system as incentive policy. In Asia, expressly in Indonesia, they changed their tax incentive policy in many times in 1990's and the attract results had changed a lot by this reason. Now we can see that host country's tax incentive policy effects the decision of investments abroad.
In most countries, generally gives the tax incentives above 5~10years after foreign investment. The host country can give tax incentive policy only to foreign investments that gives help to their economy, or can give tax incentive to all foreign investments.
Also the host country's tax incentive policies are devided into soliciting new investments and to attract reinvestments. To deside to reinvest the foreign incomes, it is desided by tax incentive policy about foreign dividends in host country and home country.
In company's side, there is country that tax rate of income is lower compared with home country. If a company makes large business income in the country, it is decreasing tax burden of big business groups that the company dose not send dividends to home country.
Companies prefer to reinvest in low-tax areas rather that high-tax area, but the capital flow from high-tax area to low-tax area are becoming meaningless. Because many countries keep decreasing the tax rate in order to attract foreign investments. Most of all OECD countries are preferring to decrease the tax rates.
The countries are decreasing the tax rate to attract foreign capital to solve their unemployment and regional economy to be active. One foreign capital's reinvestments gives expand of investments for R&D in their country. In any situation, tax is significant point in soliciting foreign investment. So, to bring in more foreign investments, they need to have more tax cuts competition as much as they want.
From one research, South Korea's R&D center abroad is about 72 in 2007, but all countries think that company's own work on R&D should be performed in home country. So, the tax incentive connected with company's R&D abroad is not discussed yet.
South Korea company's R&D business investments are not figured out, but R&D business work in local area is getting bigger. A company makes the more investment on R&D, it has the more business competition. This also leads to transfer of experience, knowledge, and technology to host country's industry. So in this part, there are lots of tax incentives to attract foreign investment. Expressly in Asia, there are tax incentives to encourage the development of new technology.
As global economic systems are lasting, host countries will try to attract foreign investments with business taxation, and companies will use outward direct investment and reinvest to make the tax burden smaller.