This study examines the dual impact of tax evasion on foreign direct investment (FDI) in emerging economies, specifically the BRICS and CIVETS blocs. It aims to assess whether tax evasion incentivizes or deters FDI inflows and explores the role of macroeconomic factors in this relationship. The study employs panel data analysis using World Bank data from 1991 to 2017. The econometric model incorporates key macroeconomic indicators, including public debt, GDP per capita growth, unemployment, and inflation, to evaluate their influence on FDI trends. A comparative approach assesses the differences in FDI responses between BRICS and CIVETS economies. The results indicate that tax evasion significantly negatively impacts FDI inflows, with a more pronounced effect in CIVETS economies due to weaker institutional frameworks and heightened economic volatility. Conversely, economic growth and effective public debt management positively influence FDI inflows, emphasizing the critical role of macroeconomic stability in attracting foreign investment. Additionally, inflation and unemployment emerge as significant determinants of FDI trends across different regions and periods. The findings highlight the necessity for policymakers to establish strong institutional frameworks and improve macroeconomic stability to alleviate the negative impacts of tax evasion on foreign direct investment (FDI). Enhancing regulatory mechanisms and promoting economic resilience can boost investment attractiveness and encourage sustainable economic growth. This study adds to the literature by providing a comparative analysis of tax evasion’s effect on FDI in two significant emerging economies. It delivers empirical insights into the intricate relationship between tax policy, economic stability, and foreign investment, guiding strategies for policymakers in emerging markets.

This paper investigates the impact of financial crime on capital inflows into the G20 economies over the period 2012–2023. Utilizing a panel dataset comprising indicators of financial crimes, specifically corruption perceptions and anti-money laundering (AML) compliance, alongside macroeconomic controls, the study examines whether financial crime significantly affects the overall magnitude and composition of international capital inflows. Employing panel corrected standard error (PCSE) estimations, the empirical results show a statistically significant negative relationship between financial crime and capital inflows, suggesting that higher financial crime risk discourages foreign direct investment (FDI) and remittances. Moreover, the adverse impact of financial crime differs across countries based on income classification, being more pronounced in lower-income G20 economies. These findings underline the critical importance of robust governance structures and practical regulatory frameworks to mitigate financial crime risks and maintain stable international capital inflows. The paper concludes with actionable policy recommendations aimed at enhancing institutional quality and strengthening financial oversight to foster investor confidence and promote sustainable economic growth.