Abstract:

The paper examines the effects of taxation, obviously, tax rates, tax incentives and exemptions on foreign direct investment in two border countries: Hungary and Romania. The significant role of FDI in economic growth of states obligates to seek for effective methods of attraction of foreign investments and that situation cause to boost up the actuality and popularity of subject which refers to tax and FDI relations. That investigation explain when tax rates declines, FDI flows increase at univariate level and there is a negative relation between reduced tax rates and foreign investments. The findings show that both countries when they reduces tax rates, involve higher amount of FDI.