Tax aspect of foreign direct investments: the role of tax havens

Abstract

Due to its economic importance, foreign direct investments (FDI) were subject of numerous prior studies. However, often is neglected a fact that FDI are frequently structured through tax havens in order to avoid taxes. The problem is further complicated as companies (primarily multinational ones) use not only remote and exotic destinations as tax havens, but also various European countries. Research results show that many European countries, that are often listed as tax havens, have unusually high level of both inward and outward FDI. It implies that these countries have a conduit role in structuring FDI. In addition, it implies that a significant portion of FDI in Europe is organized through tax havens. Research also showed that significant portion of FDI inflows in Serbia comes from tax havens, primarily the European ones.