| Abstract [eng] |
Šiušienė, G. (2026). Assessment of the Impact of the Tax Assessment of the Impact of the Tax Burden on Business on Foreign Direct Investment in European Union Countries: Master’s Thesis in Economics. Supervisor: Assoc. Prof. Dr. Kristina Matuzevičiūtė-Balčiūnienė. Vilnius University, Šiauliai Academy, 67 pp. (84 pp.). This master’s thesis analyses the impact of the tax burden on business on foreign direct investment (FDI) flows in the European Union countries over the period 2011–2023. The relevance of the study is determined by increasing international competition for capital and by the fact that, although the relationship between the tax burden on business and foreign direct investment (FDI) has been widely examined in academic literature, recent empirical studies covering the post-2021 period remain limited. The first part of the thesis examines the concept, structure, and functions of taxes, as well as the tax burden on businesses. It discusses the main elements of the tax system, the differences between direct and indirect taxes, and the significance of effective tax rates in assessing the real tax burden on businesses. The theoretical analysis shows that investors’ decisions are influenced not only by nominal tax rates but also by the overall fiscal, institutional, and macroeconomic environment. A review of scientific studies examining the impact of the tax burden on foreign direct investment (FDI) is also conducted. Empirical studies confirm a negative effect of the tax burden on investment; however, this effect depends on a country’s level of development, the complexity of the tax system, and the institutional environment. Effective corporate tax rates (EATR) and the overall tax burden are often considered more appropriate indicators than nominal tax rates. The second part of the thesis develops a methodology for assessing the impact of the tax burden on business on FDI. The study applies a panel data fixed effects model with country and year fixed effects, which allows for the assessment of time dynamics and the control of time-invariant cross-country differences. The dependent variable is foreign direct investment (FDI) flows expressed as a ratio to GDP. The main explanatory variables are the effective average tax rate (EATR) and the overall tax burden, measured as the ratio of tax revenues to GDP. The models also include control macroeconomic and institutional variables. The third part of the thesis presents the empirical analysis. The results show that EATR has no statistically significant effect on FDI flows in the overall European Union model, in the subgroup of new member states, or when lagged values are applied; therefore, the first hypothesis was not confirmed. In contrast, the overall tax burden was found to have a statistically significant negative effect on FDI flows in the baseline model, while in the new European Union member states a significant effect emerged with a one-year lag. This indicates that the impact of the tax burden on investment depends on the economic context and the level of a country’s development. In conclusion, the results of the study suggest that in the European Union countries, foreign direct investment is more strongly influenced by institutional and structural factors than by the effective average tax rate (EATR), whereas the overall tax burden is associated with a negative and statistically significant impact on FDI flows. Keywords: tax burden on business, foreign direct investment, effective corporate taxation, European Union. . |
