engleski

FDI Determinants in Southeast European Countries with Special Reference to Tax Incentives

Since the Southeast European countries have become much more attractive for foreign investors since 2000, the paper analyses factors that have influenced FDI inflows in these economies. The specific FDI determinant in SEECs has been the privatization process, especially 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 the crucial importance and will play 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 of the former major factor. Tax holidays should be avoided. Countries should also consider lengthening loss carry forward and withholding taxes on direct dividends.

FDI; Southeast Europe; tax incentives

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