Impact of Foreign Direct Investment on Tax Revenue

Abstract

Foreign direct investment (FDI) is recognized as one of the key factors for economic development of the country by stimulating foreign trade, technology transfer and etc. The study attempts to analyze the impact of foreign direct investment on tax revenue. The empirical part of the paper examines the relationship between FDI and tax revenues, examines the effects of foreign direct investment on different types of taxes (personal income taxes, value added taxes and corporate income taxes), using data for the period 2008 to 2017. The methods of the research include systematic and comparative analysis of the scientific literature, correlation and regression analysis. The study finds that foreign direct investment has positive and significant impact on total tax revenue, but the impact on different types of taxes differs. The results showed the biggest impact on value added tax revenues. So the study concludes the positive contribution of foreign direct investment in tax revenue.