Resumen de Can tax incentives be detrimental to FDI?: The role of institutions

Carlos Eugenio Garcimartín Alférez, Marta Pérez Garrido, Álvaro Anchuelo Crego

• The aim of this research is to identify the impact of taxation on foreign direct investment (FDI) in the new Eastern European EU Member States. According to our findings, while a country´s general level of taxation does have an impact on FDI, this is not the case with other partial dimensions of taxation commonly used in the literature, such as nominal or effective corporate income tax rates. However, given that institutional quality affects FDI and tax revenues influence institutional quality, the overall effect of taxation on FDI is ambiguous. For low-institutional quality countries, a tax reduction can hinder FDI, while the opposite is true for high-institutional quality countries.