Tax Attractiveness of Countries for Foreign Direct Investments

The work identifies and assesses the impact of the tax burden and tax administration, including the application of double tax treaties (DTTs), on attracting foreign direct investment (FDI) to the country. The basis of the analysis was the data of the World Bank, as well as the official websites of the tax authorities of the countries from 2008 to 2017. А panel data model with random effects was used to estimate the dependence of FDI in the country on the tax burden, the time required to prepare documents and pay taxes, the amount of payments per year for paying taxes and contributions by an enterprise, as well as the existence of double tax treaties (DTTs) with the investing country and the number of DTTs as a whole. Econometric analysis showed a positive relationship between FDI stocks in the country and the tax burden of the enterprise in it. At the same time, it was found that the increase in time, payments to pay taxes, as well as the number of applied DTTs has a negative impact on the amount of FDI in the country. Finally, there was no statistically significant relationship between the presence of a DTTs with a donor country and the volume of FDI in the country. The results show that, firstly, states can attract FDI with a high tax burden, secondly, the feasibility of further implementing measures aimed at reducing administrative barriers related to paying taxes to attract FDI, and finally the establishment of an automatic exchange of tax information between countries that have concluded the DTT through the signing of additional bilateral agreements on the exchange of tax information.