Corruption in Post-Communist Europe: Does it Affect Taxation and FDI?

Abstract

This paper focuses on the relationship between taxation and corruption in post-communist Europe. It seems plausible that negative relationships exist between corruption and tax effort and between corruption and foreign direct investments. However, research regarding corruption faces serious measurement problems due to the phenomenon’s very nature. A preliminary look at the available data provides some weak empirical evidence of a possible relationship between tax effort and corruption on the one hand and between foreign direct investments and corruption on the other. Further research into these subjects seems warranted.