Analysis of the relationship between the tax burden rate and the level of foreign direct investment in Romania

Abstract

Countries seeking to attract foreign direct investment (FDI), including Romania, use various instruments to influence the allocation decision of foreign investors, including tax incentives. However, the effects associated with the provision of these incentives are often questioned, particularly in the light of the need to achieve at least a minimum level of business attractiveness. The main purpose of the present study was to analyze the influence of GDP, the strict tax burden and the corruption control indicator on FDI. Three objectives were set to achieve this goal: objective 1 - review of the literature covering FDI and fiscal pressure; objective 2 - calculation of the strict-line fiscal pressure in Romania for the period 2012-2021, as well as identification of the corruption control indicator; objective 3 - econometric analysis of the results of the calculations, as well as GDP and the corruption control indicator on FDI. The research findings may draw the attention of state institutions to the effects of the country's tax system on FDI, as well as future investors interested in conducting economic activities on the territory of Romania.