Analysing The Impact Of Corporate Income Tax On Investment, Economic Growth, And International Tax Avoidance
- IJLLR Journal
- Aug 21
- 2 min read
Snigdha Parvathy, BBA LLB (Hons), Alliance School of Law, Alliance University, Bangalore
A. Shree Nidhi, BBA LLB (Hons), Alliance School of Law, Alliance University, Bangalore
ABSTRACT
This study researches the several impacts of CIT on investment, economic growth and international tax evasion. Corporate income taxes play a core role in developing the economic system since they tend to influence both the cost of capital, and incentives to investments, and ultimately business competitiveness, though the overall effects are indeed complex and multilateral with extreme implications on not only domestic economy but also globally.
The analysis starts by analysing how different rates of corporate taxes impact the levels of private investment, concentrating on capital formation, innovation, and entrepreneurship. It argues that higher tax rates can discourage investment as after-tax returns decline, and lower rates boost economic activity at the cost of eroding public revenue. Next, the research discusses the corporate income tax policies and economic growth, focusing on how tax structures interact with labour productivity, market dynamics, and fiscal sustainability. The evidence indicates that a poorly designed tax system can impede economic growth, while balanced reforms can enhance prospects for growth.
Finally, the study explores international tax avoidance strategies, including profit shifting, transfer pricing manipulation, and the use of tax havens. It identifies how differences in tax rates across jurisdictions incentivize multinational corporations to engage in aggressive tax planning, often undermining national tax bases. Policymakers face the dual challenge of maintaining competitive tax regimes while minimizing harmful tax practices and fostering international cooperation.
The findings underscore the need for harmonized and transparent tax policies that align with global economic realities. Addressing these issues requires a delicate balance between fostering investment, ensuring equitable economic growth, and curbing international tax avoidance. This research provides actionable insights for policymakers, scholars, and stakeholders, offering a framework for tax reforms that support sustainable economic development and fair taxation practices.
Keywords: Corporate Income Tax, Investment, Economic Growth, International Tax Avoidance, Tax Policy
