Tax Incentives and the Location of FDI. Evidence from a Panel Data in Balkan Countries

Abstract

This study aims to investigate the impact of taxation on Foreign Direct Investment (FDI) in the Balkan countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, North Macedonia, Romania, Serbia and Slovenia), for the period 2005-2018. Using the empirical analysis method, we find that FDI net inflows are influenced by the tax regime of the host countries.Our empirical results suggest that a reduction in “corporate tax rate” and “total tax and contribution rate in % of profit”, would lead the increase in FDI net inflow in the Balkan countries. So, on the contrary, the higher the “corporate tax rate” and “total tax and contribution rate in % of profit”, are, the greater the reduced FDI net flow is. Our results also suggest that the increase of “real GDP rate” and “tax revenue in % of GDP” have a positive impact on the increase of FDI net inflow in the Balkan countries.