Tax incentives and government subsidy programmes are often a critical component in investment and capital expansion decisions of multinational companies. Governments frequently use such programmes to attract foreign investments in key target industries. Although these incentive programmes can be financially attractive and may be an important factor in investment decisions of multinational companies, they may give rise to liability under international trade law if they do not comply with the rules laid down by the World Trade Organization (WTO). Penalties range from the imposition of additional duties on goods to the claw-back of benefits conferred to the cessation of such incentive programmes. This article discusses some of the potential international trade ramifications of tax incentives and government subsidy programmes.