Tax incentives for FDI are a double-edged sword. While they can bridge the gap in a country’s competitiveness in the short term, they frequently come at the cost of fiscal sustainability, economic equity, and market neutrality. In the era of the Global Minimum Tax, the “race to the bottom” is being replaced by a race toward quality. Nations that prioritize institutional stability, transparent governance, and investments in human capital will likely outperform those relying solely on fiscal favors.
This analysis explores how income tax systems attempt to reconcile equal treatment of similarly placed taxpayers with progressive redistribution based on ability to pay. It highlights structural tensions between neutrality and fairness, emphasizing the need for balanced tax design.
