This study examines the impacts of tax incentives in attracting FDI in Ethiopia from 1992 torn2013. The purpose of this research is to examine the inconsistent empirical evidence on thernuse of tax incentives in attracting FDI. The study adopts a mixed methods research wherernprimary data is collected using unstructured interview with ERCA and MoFED officials inrnaddition to this secondary data is also collected from various sources such as ERCA,rnMoFED, EIA, World Bank, Freedom House. Based on the time series analysis, the studyrnfound that, corporate tax rate has a negative and significant impacts on FDI (in aggregate) inrnEthiopia while from the control variable inflation has a negative and significant impact onrnFDI (in aggregate) but GDP growth rate, political stability and trade openness found to berninsignificant in attracting FDI in Ethiopia. Based on the random effect model, the studyrnfound that, tax holiday has positive and significant impacts on FDI (at sector level) butrncustoms duties founds to be insignificant. The control variables, FDI lag and exchange raternhave also a significant and positive impact on FDI at sector level but transport service andrnreserve as a percentage of GDP founds to be insignificant factors in attracting FDI at sectorrnlevel in Ethiopia. The trends of marginal effective tax rate of Ethiopia also shows that, therncountry is ranked 90 th from 90 selected countries in the word with METR of -3.5. Hence thernstudy suggests reducing the corporate tax rate and giving tax holiday exemptions with nornfurther incentives on customs duties. Considering non tax factors, the country shouldrnimprove its macroeconomic stability using inflation rate and exchange rate. The researcherrnalso recommends care should be taken when giving tax incentives since further reduction ofrntax rates and additional tax exemptions will erode the revenue base of the country. Therncountry should start incorporating tax expenditure report in the budget preparation.rnKey words: Tax incentives, FDI, METR, Corporate tax rate, Tax holiday, Custom duties,rnRevenue loss (forgone), Tax Expenditures