Preliminary communication
https://doi.org/10.17818/EMIP/2024/2.4
THE INFLUENCE OF THE TAX BURDEN ON PROFITS ON THE MOVEMENT OF FOREIGN DIRECT INVESTMENT IN THE COUNTRIES OF THE EUROPEAN UNION
Marija Davidović
; University of Zagreb, Faculty of Economics & Business
*
Hrvoje Šimović
; University of Zagreb, Faculty of Economics & Business
* Corresponding author.
Abstract
The aim of this research is to examine the impact of changes in the tax burden on profits on the flow of foreign direct investment in the European Union countries. While tax factors are not decisive in making investment decisions, the issue of taxes and the overall tax system is becoming increasingly significant in investors' choices. Empirical research in this study is conducted using a dynamic panel analysis (PMG/ARDL) to assess the effect of the tax burden on profits on the movement of foreign direct investment in the short and long term. The empirical results show that the tax burden on profits has a significant impact on the attractiveness of foreign direct investment in the European Union member states, with the most significant impact coming from the effective average tax rate on profits. The issue of changing tax rates and their impact on foreign direct investment inflows is always relevant, as governments strive to attract foreign investment that have a positive impact on economic growth and development, and promote the creation of new jobs while enhancing human capital, skills, and knowledge.
Keywords
tax burden on profits; effective tax burden; foreign direct investment; panel ARDL; European Union
Hrčak ID:
322913
URI
Publication date:
2.12.2024.
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