FDI Determinants in Southeast European Countries with Special Reference to Tax Incentives
AbstractAs Southeast European countries have become much more attractive for foreign investors since 2000, this paper analyses factors that have influenced FDI inflows in these economies. There is a broad consensus that, regardless of the type of FDI, the most important FDI determinants include market size, prospects for market growth, the degree of development of host countries and the progress made in the process of transition, especially progress in institutional development. Still, the specific FDI determinant in SEECs has been the privatization process, especially that of large-scale state assets. The assessment of the impact of tax incentives on FDI is evolving - showing increasing evidence that tax incentives in their broadest sense could have a significant impact on the pattern of regional FDI. The effects of incentives are likely to be particularly strong in the competition for FDI within regions, when the initial investment decision has been taken and the investor is choosing between alternative locations in a given region. In such circumstances, taxes will start to play an important role, especially corporate income tax. Its tax rate is of crucial importance and will play a major role in attracting investment. Accelerated depreciation and tax credits (allowances) for investment are even more cost efficient and could be seen as a good supplement to the former major factor. Tax holidays should be avoided. Countries should also consider lengthening loss carry forward and withholding taxes on direct dividends.
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Bibliographic InfoArticle provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Studies.
Volume (Year): (2006)
Issue (Month): 3 ()
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carstensen, Kai & Toubal, Farid, 2004.
"Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis,"
Journal of Comparative Economics,
Elsevier, vol. 32(1), pages 3-22, March.
- Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy.
- Nada Mora & Ratna Sahay & Jeromin Zettelmeyer & Pietro Garibaldi, 2002.
"What Moves Capital to Transition Economies?,"
IMF Working Papers
02/64, International Monetary Fund.
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