The Economic Factors Affecting FDI Absorption in Iran with Emphasis on the Role of Income Tax (Fuzzy Approach)

Foreign direct investment (FDI) is one of the major factors affecting the economic growth and development of a country. Iran's economic condition not only steers liquidity towards non-productive activities but also doesn't have sufficient domestic capital for economic growth and propensity. Thus, absorption of the foreign financial funds seems to be a useful and effective way to compensate for this shortcoming. Therefore, in this paper, we discuss on the importance of the variables affecting the FDI absorption in Iran during the period 1981-2016 using fuzzy regression with emphasis on the role of income tax. The results of the research show that income tax has a small effect on Iran's FDI absorption with a negative and negligible fuzzy coefficient. Further, income tax is not considered as the main determinant factor in attracting foreign investment in Iran. Also, economic factors such as GDP, commercial openness, human capital and population have a positive effect and inflation and exchange rates have a negative effect on FDI inflows in Iran.