Foreign direct investment and taxation: untangling the relationship: A mixed-methods study on what truly attracts investors
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- This thesis explores the complex relationship between taxation and foreign direct investment (FDI), challenging the conventional wisdom that tax incentives are primary drivers of investment inflows. Using a mixed-methods approach, combining a global panel data analysis of nearly 200 countries (2013–2023) with expert interviews, the study evaluates whether tax incentives stimulate productive investment or simply facilitate profit shifting. The quantitative analysis reveals no consistent correlation between corporate tax rates and FDI, highlighting GDP and institutional quality as more significant predictors. Regional regressions show tax sensitivity varies, particularly in emerging economies like Africa and Asia. Qualitative insights emphasize that while tax policy remains a factor, investors now prioritize stability, governance, and ethical considerations. The findings suggest that effective investment attraction policies should focus on macroeconomic credibility and institutional transparency, rather than aggressive tax competition. This thesis advocates for nuanced, context-sensitive tax strategies aligned with broader economic fundamentals and global tax reforms.