An Analysis of the Impact of Green Tax on Foreign Direct Investment Attraction in Selected OECD Countries

Many countries seek to create an attractive environment for foreign investors for economic growth and prosperity. On the other hand, the expansion of energy consumption and combustion of fossil fuels in the direction of economic growth has increased the emission of greenhouse gases in the world. Therefore, many countries have implemented green taxes to protect their environment. Many studies have been done on the relationship between taxes and foreign direct investment. The purpose and innovation of this research is to investigate the effect of green tax in particular, instead of the general effects of taxes on the attraction of foreign direct investment in member countries of the Organization for Economic Development and Cooperation (OECD). In this research, using panel data during the twenty-year period from 2003 to 2022 for twenty OECD member countries that have a tax on carbon production, it is intended to investigate the effect of some economic variables on foreign direct investment. The ARDL panel estimation results indicate that the variables of GDP and the degree of openness have a positive effect and the variables of exchange rate and green tax in the long term have a negative effect on foreign direct investment in the countries under review; Therefore, countries with lower green taxes will be more likely to attract foreign direct investments. As a result, in order to achieve sustainable development and preserve the environment, it is necessary to design and implement policies that, in addition to maintaining the attractiveness of foreign investments, prevent environmental destruction and realize environmental goals.