BusinessCorporate FinanceLower corporate tax rates attract foreign investment

Lower corporate tax rates attract foreign investment

Big GDP and low tax rates are key to foreign direct investment

LOWER CORPORATE TAX rates increases the amount of foreign investment into a country, a report by fDi Magazine, from the Financial Times, has found.

Although a country’s GDP is the biggest determining factor in attracting inward investment, the sample of 46 countries found that corporate tax rates also correlated with inward investment.

With the OECD and G7 looking at ways to counter multinational tax avoidance, changes to tax rates could directly impact on inward investment, the report suggested.

The UK performed slightly better than other European countries, increasing its market share of foreign direct investment to 20.87%, the highest in Europe. The UK and Germany accounted for 45% of foreign direct investment in Western Europe.

While investment declined globally, there were some exceptions: Chile; Spain, Indonesia; Poland and Oman experienced strong growth. Chile has seen 5%+ GDP growth rates, and attracted renewable energy investment attracted to the weather conditions that are ideal for solar power – and electricity demand from the mining sector.

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