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red the responsibility for trade and exchange rate policies from national governments to the European Commission and the European Central Bank.

Policies on incentives have so far not been subjected to any significant coordination. A direct consequence of this lack of coordination is that the countries are trapped in the 'prisoner's dilemma'. Meaning that, once all the governments develop such policies without cooperation, it is impossible for a state not to participate in this game, at least at the same level with other states. The generalization of such a generous policy on incentives is likely to exceed the profits from the deployment of foreign multinationals, forcing the country to cannot deny these policies or offer less generous incentives. So as a definition of competition on tax incentives could be given 'the situation in which the authorities are lured to provide investment incentives or to modify existing incentives, as a consequence of policies on incentives followed elsewhere.'

However, the politicians of the Members States had undertaken to endorse the national productions, competitiveness, employment and welfare, it is normal to give greater emphasis too tools that have in their possess like corporate tax incentives. In that way, the competition between states in the 'incentive package” is increasing. Corporate taxation incentives are of vast importance for the member countries in the periphery of EU.

The enlargement of 2004 created within the European Union two opposing tendencies. The first positive trend lies with the incentives introduced by the new countries which they reinforce the competitiveness of the European economy as a factor leading to development. The second trend is negative adjacent to the policies on incentives applied there, arguing that firms in the old Member States will abandon their country to settle in the new eastern countries where conditions are more favorable. This trend is likely to increase competition on the particular incentives both among the new member countries, and between them and the older 15 members.

The previous issue has been a hot topic for many years, before and after the entry of ten new countries in the European family. But, at this time is very interesting to see how the periphery of Europe has reacted to the biggest enlargement of the EU.

The basic theoretical position is that the creation of the European Union sets the conditions for the intensification of competition, lowering the production costs leads to potential attraction of FDI. The Factors contributing to this effect is the elimination of protectionism and the creation of programs convergence of European economies

As a result of these factors is the creation of two groups of countries in Europe regarding the foreign direct investments: the central countries (Belgium, Luxembourg, France, Germany, United Kingdom, Italy and Netherlands) and regional countries (Denmark, Greece, Ireland Spain, Portugal, Sweden, and Finland). The first are characterized by high GDP and high FDI and the second from a low of GDP (excluding Denmark, Sweden and Finland) and low but rising on FDI.

The purpose of this master thesis is to examine empirically the importance of certain factors and specifically the level of corporate taxation in the effort of the countries that are to the periphery of Europe to attract FDI. These countries were se