Tax incentives as a factor of economic growth ivana domazet and darko marjanović

 
 
5. Discussion 
Among the most important objectives of economic policy makers, great 
importance is given to creation of investment climate which should encourage foreign 
direct investment. In order to increase investment, a very important instrument is a 
stimulating tax environment within which the income tax mostly enhances economic 
activity in domestic environment and contributes to attracting the necessary foreign 
capital. The various tax incentives in income tax system have become a key 
determinant of tax competition in attracting foreign capital. Countries that allow 
foreign investors preferential tax treatment through a wide range of tax incentives 
(mostly in the system of income tax), providing the necessary economic and social 
conditions, have achieved significant growth, respectively inflow of foreign capital. 
In order to thoroughly analyze the explicit attitudes of foreign investors who 
are already doing business in Serbia, the importance of tax incentives has been 
examined in certain areas of operations of foreign investors through empirical 
research. The aim of this research is to identify potential problems that could 
adversely affect the decision of foreign investors when investing capital in Serbia. That 
is, to show which tax incentives are important to the investors and to what extent they 
matter, so as to contribute improving business environment and economic growth in 
Serbia in future.
Tax incentives for investment in certain industries are very important to foreign 
investors whose business entity in Serbia is of a medium-size. Unlike them, foreign 
investors with a large business entity in Serbia do not consider these tax incentives so 
important. Foreign investors, whose business entities in Serbia represent small and 
medium-sized businesses ascribed greater importance to tax incentives for companies 
that export. Foreign investors, whose business entities in Serbia are large enterprises, 
consider that these tax incentives do not impact greatly their commitment to invest 
capital in Serbia. 
Analyzing the importance of tax incentives for doing business in free zones, the 
conclusion can be drawn that foreign investors, whose business entities in Serbia 
represent small and medium-sized businesses, estimated that they these tax incentives 
are significant in their business. Foreign investors, whose business entities in Serbia 
represent large businesses, considered that these tax incentives do not have huge 
impact on their business. Foreign investors, whose business entities in Serbia are small 
businesses, put greater importance on tax incentives regarding hiring new workers in 
comparison with foreign investors whose business entity in Serbia is of a large size. If 

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Domazet, I., Marjanović, D.
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tax incentives for the establishment of small and medium-sized enterprises are taken 
into consideration, it can be noted that foreign investors whose business entities in 
Serbia are of a small size ascribe more importance to these incentives in comparison 
with foreign investors whose business entities in Serbia are medium and large 
businesses.