An Effective Average Tax Rate as the Deciding Factor in Tax Competitiveness in the Context of Foreign Investment Influx
Alena Andrejovska, Jozef Glova
Keywords:
tax competitiveness, effective average tax rate, inflow of foreign direct investment, cross-border
investment, intangible and tangible assets
Abstract:
A higher tax burden in individual countries need not always deter investors from investing
profitably. Countries use tax burden levels in the form of changes in tax rates to attract foreign
investment. The main objective of this study is to examine the tax competitiveness of the Slovak
Republic compared to European Union (EU) countries (EU-27) and to evaluate the origin,
extent, and form of investments from foreign investors in tangible and intangible assets in the
Slovak Republic. To meet this objective, we first calculate the average tax rate for specific crossborder
investments coming to Slovakia from all EU countries. To determine tax competitiveness,
we compare the calculated effective average tax rate (EATR) with the EATR in individual EU
countries. Finally, we perform an analysis of EATR and foreign direct investment (FDI) using
cluster analysis, which categorises EU countries and evaluates their tax competitiveness. The
analysis and comparison of values are conducted for the year 2019, while the countries are
divided into old (EU-15) and new (EU-12) EU member countries. The article concludes that
the calculated Slovak EART for cross-border investment is more profitable for old EU member
countries and is, thus, more tax-competitive versus investors’ countries of origin. We can further
state that the tax burden is among the most important indicators for investors and, thus, a lower
EATR value than that in an investor’s country of origin contributes to the inflow of equity
participation of FDI in Slovakia.
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 An Effective Average Tax Rate as the Deciding Factor in Tax Competitiveness in the Context of Foreign Investment Influx [PDF file] [Filesize: 853.05 KB]
 10.7441/joc.2022.03.01
Andrejovska, A., & Glova, J. (2022). An Effective Average Tax Rate as the Deciding Factor in Tax
Competitiveness in the Context of Foreign Investment Influx. Journal of Competitiveness, 14(3), 5–23. https://doi.org/10.7441/joc.2022.03.01
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