Fiscal benefits and environmental costs of the corporate tax race to the bottom

The goal of this thesis is to compare the fiscal benefits and environmen- tal costs of inward foreign direct investment (FDI) gained through lowering the corporate tax. We achieve this by utilizing a dataset constructed from multiple sources, primarily World Bank, UN, and UNU WIDER. It encom- passes 223 countries and territories between 1990 and 2020. In the three-step model, we first explain the variation in FDI due to a change in the corpo- rate tax rate, later investigate the effect of the change of FDI on government corporate tax revenue, and finally, we examine the effect of FDI change on CO2 emissions. We then convert those to monetary terms using the social costs of carbon mechanics. The results show that although we have discovered a significant positive fiscal effect of corporate tax cut, we have failed to prove the existence of a causal relationship between FDI change and change in CO2 emissions per capita. Moreover, we did not find evidence of this relationship on any regional or development level. We verified the existence of a positive impact of corporate tax cut on incoming FDI. Keywords Corporate taxation, greenhouse gas emissions, social costs of carbon, for- eign direct investment, tax havens