Foreign direct investment, FDI, has been identified by countries in transition towards market economies as an important element of that transition. This has led these countries to seek ways to attract FDI. In particular, a number of countries in the region have introduced tax incentives directed at attracting FDI. The use and effectiveness of such incentives in the context of the countries in transition have been the subject of a number of conferences sponsored by the OECD and others. This chapter draws upon these discussions. Experience among OECD countries has suggested that tax incentives are not an effective way to promote or direct economic activity. This experience has led most observers from OECD countries to advise that the use of such incentives be avoided. In the context of advising the economies in transition, a number of questions and observations can be made.