SEEU Review vol. 6 Nr. 2 (pdf) - South East European University

Haderi S., Prof. Dr.; Kola T., Prof. Asocc. Dr.; Liko E., Dr.IntroductionIn the last year in developing and developed countries has been aconsiderable decrease in statutory corporate tax rate. In Albania since thebeginning of year 2008, is applied a low rate of 10% of statutory corporatetax rate that is significant low relative to average statutory corporate tax rateapplied in EU-15 at about 27.15% but comparable to some regionalcountries like Bulgaria, Serbia and Bosnia and Herzegovina. In the study weare focused on finding empirical evidence of the impact of using corporateincome tax as fiscal incentive to attract FDI. From theoretical perspectiveCIT rates in small countries like Albania is expected to be relative smallrelative to big counties, and interdependence in the rates they impose (seeRandelph 2005).Since the statutory corporate tax rate that a country apply is not the onlytax that may affected FDI location, but other taxes such as labor taxes andother indirect taxes may also influence investment decision, in this work isdone a analyze of main taxes applied in Albania and comparison with thatapplied by neighbor countries.The total volume of FDI inflows in Albania is among the lowest relativeto regional counties. This means that investment decisions are not onlyaffected by the statutory corporate tax rate but also on the measurement ofthe tax base (Devereux 2007). In some region countries like Croatia,Macedonia and Serbia are used tax holiday as fiscal incentive. Depreciationmethod that the countries use for tangible assets has also a significant impactin determination of tax base. In two regional countries Bosnia andHerzegovina and Romania is applied accelerated depreciation method with amaximum depreciation rate of about 50% relative to linear depreciationmethod applied in Albania.In empirical work based on the panel data for regional countries for thetime period 2001 -2008, is analyzed indirectly the impact of taxcompetitiveness by looking for the responsiveness of foreign investment tocorporate rate. In the model are included control macroeconomic variables,such as GDP per capita, average wage, openness to foreign trade, and EBRDtransition index, because in the literature is broadly accepted that fiscalincentives could not replace a sound macroeconomic environment.136