DOI: 10.12688/f1000research.191856.1 ISSN: 2046-1402

Tax Holidays, Fiscal Justice, and Domestic Industrial Competitiveness in Developing Economies: A Systematic Literature Review

Rony Eli Hutahaean, Dhaniswara K. Harjono, Bernard Nainggolan, Aarce Tehupeiory
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This study systematically examines how tax holidays influence foreign direct investment (FDI) attraction, fiscal justice and the distribution of economic benefits, and domestic industrial competitiveness in developing countries, with particular attention to the policy design factors that shape their effectiveness. This study uses a systematic literature review method based on the PRISMA 2020 approach and concept-centric synthesis. The article search is conducted through the Scopus database by selecting English-language journal articles that are final publications and published between 2020 and 2026. A total of 29 articles are included in the final qualitative synthesis. The findings show that tax holidays can reduce investors’ effective tax burden and support FDI attractiveness. However, their effectiveness is conditional because it is influenced by institutional quality, political stability, infrastructure, market access, and investment governance. In addition, tax holidays can create revenue forgone, opportunity costs, and a concentration of benefits if they are not designed transparently and based on performance. The novelty of this study lies in its integration of FDI, fiscal justice, and domestic industrial competitiveness perspectives into a single development policy synthesis framework.

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