Temesgen Worku (PhD)Yikunoamlak Gebire Mariam2025-05-162025-05-162025-01-19https://etd.aau.edu.et/handle/123456789/5485Foreign direct investment plays a significant role in the development process of developing countries. Given this many developing countries particularly, Ethiopia made a number of attempt to attract FDI. Fiscal incentive was one among the attempts made to create investment friendly environment. This study examines the impacts of tax incentives in attracting FDI in Ethiopia from 2004-2022. The purpose of this research is to examine the inconsistent empirical evidence on the use of tax incentives in attracting FDI. The study adopts a mixed methods research where primary data is collected using unstructured interview with ECC and MOR officials in addition to this secondary data is also collected from various sources such as ECC, MOR, EIC, NBE, World Bank and Freedom House. Based on the Panel data analysis and the fixed effect model result the study found that custom duty & tax holiday has a positive and significant impact on FDI but GDP growth rate and political stability has insignificant in attracting FDI in Ethiopia. Hence the study suggests that reducing the corporate tax rate, custom duty and tax holiday exemptions. Considering non tax factors, the country should improve its macroeconomic stability using inflation rate and exchange rate. It is also recommend care should be taken when giving tax incentives since further reduction of tax rates and additional tax exemptions will erode the revenue base and increase revenue loss (forgone) of the country. Key words: Tax incentives, FDI, Corporate tax rate, Tax holiday, Custom duties, Revenue loss (forgone), Tax Expenditures.enThesis