The dual impact of tax evasion, does tax evasion incentivize or dampen FDI, perspectives from the emerging economies of BRICS and CIVETS blocs?

Raed Khasawneh (), Mahmoud Hailat (), Anas AlQudah () and Amal Haj Mohammad ()
Authors registered in the RePEc Author Service: Anas Mohammad Al Qudah ()

International Journal of Innovative Research and Scientific Studies, 2025, vol. 8, issue 1, 2796-2803

Abstract: This study examines the dual impact of tax evasion on foreign direct investment (FDI) in emerging economies, specifically the BRICS and CIVETS blocs. It aims to assess whether tax evasion incentivizes or deters FDI inflows and explores the role of macroeconomic factors in this relationship. The study employs panel data analysis using World Bank data from 1991 to 2017. The econometric model incorporates key macroeconomic indicators, including public debt, GDP per capita growth, unemployment, and inflation, to evaluate their influence on FDI trends. A comparative approach assesses the differences in FDI responses between BRICS and CIVETS economies. The results indicate that tax evasion significantly negatively impacts FDI inflows, with a more pronounced effect in CIVETS economies due to weaker institutional frameworks and heightened economic volatility. Conversely, economic growth and effective public debt management positively influence FDI inflows, emphasizing the critical role of macroeconomic stability in attracting foreign investment. Additionally, inflation and unemployment emerge as significant determinants of FDI trends across different regions and periods. The findings highlight the necessity for policymakers to establish strong institutional frameworks and improve macroeconomic stability to alleviate the negative impacts of tax evasion on foreign direct investment (FDI). Enhancing regulatory mechanisms and promoting economic resilience can boost investment attractiveness and encourage sustainable economic growth. This study adds to the literature by providing a comparative analysis of tax evasion’s effect on FDI in two significant emerging economies. It delivers empirical insights into the intricate relationship between tax policy, economic stability, and foreign investment, guiding strategies for policymakers in emerging markets.

Keywords: BRICS and CIVETS emerging economies; FDI; Tax evasion. (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ijirss.com/index.php/ijirss/article/view/5058/809 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aac:ijirss:v:8:y:2025:i:1:p:2796-2803:id:5058

Access Statistics for this article

International Journal of Innovative Research and Scientific Studies is currently edited by Natalie Jean

More articles in International Journal of Innovative Research and Scientific Studies from Innovative Research Publishing
Bibliographic data for series maintained by Natalie Jean ().