Macroeconomic Determinants of Effective Corporate Tax Rates: The Case of the Slovak Republic

The effective corporate tax rate is a critical measure reflecting a nation’s fiscal policy and its attractiveness to foreign investment. This study investigates the relationship between macroeconomic determinants and effective corporate tax rates, focusing on Slovakia’s competitiveness within the European Union from 2004 to 2022. Using a panel regression model, the research identifies significant correlations between nominal tax rates, unemployment, government debt, and effective tax rates. Our findings reveal a consistent downward trend in both nominal and effective tax rates across EU member states, with Slovakia maintaining relatively lower effective tax rates compared to older EU members, thus enhancing its fiscal competitiveness. However, discrepancies persist among member states, influenced by differences in tax policies, enforcement, and exemptions. The study underscores the complex interplay between fiscal policies and macroeconomic conditions, highlighting the importance of aligning effective tax rates with broader economic goals. Policymakers are advised to consider reforms that balance tax competitiveness with fiscal sustainability, ensuring that effective tax rates reflect intended policy outcomes. This analysis offers valuable insights into tax policy dynamics within the EU and provides a framework for designing strategies to attract investment while maintaining economic stability.