Tax Incentives And Foreign Investment Attractiveness: Evaluation Of Effectiveness On FDI Levels In National GDP

Autor(s): Muhammad Emilson, Annissa Putri Syahira, Beny Susanti, Zulkifly Zulkifly
DOI: 10.35760/ugefic.v8i1.131

Abstract

This study evaluates the effectiveness of tax incentives in attracting Foreign Direct Investment (FDI) to Indonesia and their contribution to Gross Domestic Product (GDP). FDI plays a crucial role in economic growth by providing capital, technology transfer, and job creation. To enhance investment attractiveness, the government has introduced various fiscal facilities, including tax holidays, tax allowances, and incentives in Special Economic Zones. Using a qualitative descriptive method with a case study approach, this research analyzes secondary data from 2020–2023. The findings indicate that Indonesia’s FDI-to-GDP ratio remains low, between 1.5% and 1.9%, thus limiting its impact on economic growth. A comparison with other ASEAN countries highlights that non-fiscal factors—such as political stability, regulatory certainty, infrastructure, and human capital quality—are more influential in investment decisions than tax policy alone. Therefore, tax incentives should be complemented with structural reforms to strengthen the investment climate and maximize FDI’s economic impact.

Keywords

tax incentives, foreign direct investment, gdp, indonesia, investment climate

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References

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DOI: http://dx.doi.org/10.35760/ugefic.v8i1.131

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