In order to attract FDI, a large market(as in India), availability of labour at competitive price(as in India),sound economy, secure economy.................these are the major considerations. Can we attract more FDI just by providing tax benefits by reducing the applicable rate of Corporate Taxation.
Prior research on this topic offers inconclusive findings. Some of the research (Beyer, 2002; Cleeve, 2008; Klemm & Van Parys, 2012) does not find or only partially finds positive impact of tax incentives on FDI inflow. On the other hand, some of the research (Bellak & Leibrecht, 2009; Vogiatzoglou, 2018) treat taxation as highly important factor of FDI.
However, it is not only relevant the corporate tax rate in the host country, but also withholding tax network of the host country and parent country treatment of income earned in host country.
In the real world, it seems that high corporate tax burden may discourage FDI inflow, while low corporate tax burden may encourage FDI only if additional assumptions are fulfilled (political stability, skilled labor available at attractive prices etc).
Bellak, C. & Leibrecht, M. (2009). Do Low Corporate Income Tax Rates Attract FDI? – Evidence from Central- and East European Countries. Applied Economics, 41 (21), 2691-2703.
Beyer, J. (2002). „Please Invest in Our Country‟ – How Successful were the Tax Incentives for Foreign Investment in Transition Countries? Communist and Post-Communist Studies, 35 (2), 191-211.
Cleeve, E. (2008). How Effective are Fiscal Incentives to Attract FDI to Sub-Saharan Africa? Journal of Developing Areas, 42 (1), 135-153.
Klemm, A. & Van Parys, S. (2012). Empirical Evidence on the Effects of Tax Incentives. International Tax and Public Finance, 19 (3), 393-423.
Vogiatzoglou, K. (2018). Differences in Inward FDI Performance between the Southern Eurozone and Eastern EU Members: A Panel-Data Analysis Over 2004-2016. Economic Themes, 56 (4), 519-532.
Ireland has been particularly successful in attracting multinational corporations due to their 12.5% corporate tax rate. So this example may support your research.
https://www.irishtimes.com/business/financial-services/effective-tax-rate-paid-by-companies-here-last-year-was-12-4-1.4132032
Most economists mix-up FDi with real investment. In fact, FDI is only a monetary transfers from a tax subject to a tax subject of another country to buy (shares of) an enterprise. Nothing real happens. Maybe that later on, the new owner invests into the purchased firm (bringing-in some technical progress), which will be counted as domestic (real) investment. But s/he can slso close down parts of the firm or transfer its procedures to other countries. A low CT-rate is mainly an incentive to "import" taxable profits frm other countries, damaging the tax revenues of these coutries. The real effects may be negligible. Corporate tax cannot lead to negative net profits, but cost components (incl. taxes on them) can.
This assertion is real. But the problem is more complex. We must take into account all the advantages and disadvantages of foreign investments.
Low tax is one of the motivators, but only low taxes can't attract FDI. Abundant and skilled workforce at low wages, favorable government policies, special economic zones, political stability might have an additional role.
Kindly visit..
https://www.researchgate.net/deref/https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Feffective-tax-rate-paid-by-companies-here-last-year-was-12-4-1.4132032
Whereas agree with Dr Stefan Vrzina
Check..
Beyer, J. (2002). „Please Invest in Our Country‟ – How Successful were the Tax Incentives for Foreign Investment in Transition Countries? Communist and Post-Communist Studies, 35 (2), 191-211.
Cleeve, E. (2008). How Effective are Fiscal Incentives to Attract FDI to Sub-Saharan Africa? Journal of Developing Areas, 42 (1), 135-153.
Klemm, A. & Van Parys, S. (2012). Empirical Evidence on the Effects of Tax Incentives. International Tax and Public Finance, 19 (3), 393-423.
Taxes certainly appear to be an important factor in attracting foreign direct investment inflows, particularly for the smaller host countries and certain types of investment. However, other location advantages such as resource endowments and market access are usually considered the main drivers of this type of investment.