The Pros and Cons of Lowering Corporate Income Tax Rates
When countries lower their corporate income tax rates, they often become more attractive destinations for foreign investors. A study by the OECD found that a 1% decrease in the corporate tax rate leads to, on average, a 3.7% increase in foreign direct investment (FDI). A lower tax burden can entice multinational corporations to establish or expand their operations within a country’s borders. This influx of foreign capital can lead to increased economic activity, ranging from infrastructure development to job creation.