THE IMPOTRANCE OF TAX INCENTIVES IN STIMULATING FOREIGN DIRECT INVESTMENT

Abstract The article examines investments as a key factor in sustainable economic development in the context of the modern market economy. Special attention is given to the role of investment activity in upgrading the material and technical base, expanding production, exploring new sectors, and ensuring the reproduction of fixed capital. The focus is placed on analyzing the investment climate in the Republic of Azerbaijan, including the impact of foreign direct investment on enhancing export potential, introducing modern technologies, and increasing employment. The aim of this study is to analyze the investment climate in Azerbaijan, identify issues within the investment sphere, and assess the effectiveness of investment policy in the context of sustainable economic development. Particular attention is paid to tax policy as one of the tools for stimulating investment, as well as to the measures aimed at creating a favorable investment environment. The article highlights the importance of strategic investment flow management for achieving balanced growth and modernization of Azerbaijan’s economy. The object of the study is investment activity in the Republic of Azerbaijan, including the inflow of foreign investments, government support measures, tax incentives, and legal regulation. The methodology of the research is based on a systemic and comparative analysis, statistical data processing methods, economic and mathematical modeling (particularly the analysis of the investment multiplier according to Keynes), and content analysis of legal acts and strategic documents. The study emphasizes the significance of investments as a crucial mechanism for economic growth and structural transformation. It explores modern forms of investments, their impact on macroeconomic indicators, and the role of tax incentives in encouraging entrepreneurial activity. Special attention is given to the implementation of state investment policy and the creation of a favorable environment for foreign investors.