THE IMPACT OF CORPORATE TAX RATES ON INFLOW OF FOREIGN DIRECT INVESTMENTS

The article examines the impact of corporate tax rates on infl ow of foreign direct investments. In the last 15 years the countries all over the world have adopted numerous measures in order to attract more foreign capital. One of the most common measures has been the reduction in the corporate tax rates. Although useful, this article shows that taken in isolation this measure has not had a significant impact on investment decision taken by the foreign investors.
Macroeconomic stability, stable social and political environment, ease of doing business and ability to hire skilled labour, infl uence investment decisions much more then the level of corporate tax rates.
Croatia has also lovered its corporate tax rate from 35% to 20% in 2001. Judging from the available data that has not had any impact on infl ow of FDI. In order to attract more greenfield investment Croatia will have to sort out some domestic issues and to organise more effective targeting of the largest multinational companies.