The impact of foreign direct investment inflows on the tax revenues in bangladesh

Abstract

Purpose: Now-a-days, domestic capital alone is not enough for economic development of a developing country. Developing countries in fact, seek adequate Foreign Direct Investments always. Although indirect tax increases through FDI inflows, but direct tax does have a negative influence on FDI inflows. This research investigates the impact of FDI inflows on tax revenues in Bangladesh. Methodology: The study has been completed based on time series data for the period of 2001–2020, where we considered tax revenue as a dependent variable, and FDI inflow as an independent variable. We also used the simple regression analysis technique for analyzing our data. Findings: The results reveal that FDI inflows do have a positive influence on tax revenues, by which, we can affirm that one unit change in independent variable (FDI inflow) increases tax revenues in Bangladesh by 8.22 units. Implication: Policy makers, economists, and regulators like NBR along with new researchers shall get an important insight about the impact of FDI inflows on tax. Originality: There is hardly any study available on this subject in the context of Bangladesh. Thus, to the best of our knowledge, this is a pioneering attempt, aiming to analyze the impact of FDI inflows on the tax revenue in Bangladesh.