Relationship between Tax Regulations and Direct Foreign Capital: Case of Balkan Countries

Nuri BALTACI, Muhammet ŞAHİN


Abstract. Balkan countries draw attention of many countries and investors after eastern bloc countries spread to free market economy. Moreover, these countries need to attract foreign capital as a development instrumental in order to adapt to the market system. They, for the purpose of attracting foreign capital inflow to their own countries, utilize tax advantages with many other applications. In this study, the relationship between foreign capital and tax in 11 Balkan Countries is examined. Annual data for the period of 2006-2014 was used in this study. System GMM (Dynamic Panel Data) was preferred as a model in this study. According to the findings through the analyses, a negative relationship is observed between indirect taxes and foreign direct capital investments for the sample countries while a positive relationship is found between total tax obligations, obtained from profit based, and foreign direct capital investments.

Keywords. FDI, Tax rates, Panel data.

JEL. F21, H25, C23.


FDI; Tax Rates; Panel Data.

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