Tax Policy and Its Impact on Corporate Investment Behavior

Abstract

Tax policy plays a strategic role in shaping corporate investment behavior. This study aims to evaluate the impact of taxation policy on corporate investment decisions using a literature review approach. The analysis focuses on empirical and theoretical approaches to understand the multifaceted relationship between fiscal instruments and corporate strategic actions. The findings reveal that changes in tax rates, targeted fiscal incentives, and regulatory stability significantly influence both the intensity and direction of corporate investment across both developing and developed economies. Moreover, the presence of tax uncertainty is found to have a consistently negative impact on investment decision-making, leading firms to delay or divert planned capital allocations. The study contributes to the existing body of literature by highlighting both microeconomic and macroeconomic dimensions of fiscal policy in relation to corporate strategy. It underscores the importance of regulatory predictability and institutional quality in maximizing the effectiveness of tax policy as a tool for encouraging sustainable corporate investment.