This article examines the effectiveness of tax incentives as a fiscal instrument for stimulating domestic investment, with a particular focus on emerging economies. Drawing on international empirical evidence and selected macroeconomic facts from Uzbekistan, the study analyzes the transmission mechanisms through which tax incentives influence investment decisions, evaluates heterogeneity across firm types, and discusses potential trade-offs between investment quantity and quality. The findings suggest that tax incentives can stimulate domestic investment when embedded in coherent institutional frameworks, supported by financial sector depth and administrative capacity. However, poorly targeted incentives risk generating windfall gains, misallocation of capital, and diminished investment efficiency. The article contributes to the policy debate by synthesizing empirical insights and proposing a conceptual model tailored to structurally transforming economies.

: tax incentives, domestic investment, user cost of capital, emerging economies, Uzbekistan

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