Tax incentives have been used by countries to stimulate foreign investment. Few countries doubt the effectiveness of tax incentives. Canada and Indonesia are among the many countries that offer tax incentives to attract investors. While Canada has a long history of using tax incentives to foster the development of the Alberta oil sands, Indonesia is just embarking on this strategy, especially in promoting foreign investment in remote areas.
Drawing on the Canadian development of the Alberta oil sands, this thesis asks what lessons Indonesia can learn from that experience in relying on tax incentives to develop the industry. This thesis acknowledges that there are many important differences between Canada and Indonesia. Since most countries speak of using tax incentive to finance their petroleum industries, it is worth examining at least one instance of that strategy and see whether Indonesia can extract any thing of value from this examination.
This thesis concludes that tax incentives have been largely insignificant in attracting foreign investors to the development of the Canadian oil sands. Tax incentives occurred as compensation to offset the extra cost involved in commencing oil sands projects. The Canadian case suggested that the Indonesian government should not rely on tax incentives only in promoting its petroleum industry.