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An empiric approach of the FDI-taxation relationship in Romania

Author

Listed:
  • Ioan TALPOȘ

    (West University of Timisoara)

  • Bianca Maria LUDOŞEAN (STOICIU)

    (West University of Timisoara)

Abstract

In the heart of the debate on the appropriate level of the profit tax burden on host countries lies a challenging question: How does FDI respond to tax rates? Studies analyzing inter-state fluctuation show that, on average, FDI decreases by 3.7% when corporate tax rates increase by one percentage point, other studies show that the FDI decline varies between 0 and 5%. Such variations reflect differences between nations and industries studied, as well as differences between time periods which have been considered. More recent studies show that FDI becomes increasingly sensitive to tax reflecting a growing mobility of capital as non-tax barriers, previously in the way of FDI, are eliminated (OCDE, 2008). The present article aims to study the effects of tax upon foreign direct investment in Romania. The period studied prolongs on ten years, from 1999 to 2009, with the aim to observe the effects of modifications upon tax revenues, direct tax and indirect tax on foreign investment in Romania. To study the relationship between the variables, econometric modelling has been used thanks to the software package Eviews 5.0. This paper’s main conclusion is that foreign direct investment are not discouraged by the level of tax in Romania, on the contrary, they are stimulated by an eventual increase in tax revenue.

Suggested Citation

  • Ioan TALPOȘ & Bianca Maria LUDOŞEAN (STOICIU), 2012. "An empiric approach of the FDI-taxation relationship in Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(10(575)), pages 15-30, October.
    • Handle: RePEc:agr:journl:v:10(575):y:2012:i:10(575):p:15-30
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    Cited by:

    1. Ciprian ROTARU & Raluca GEORGESCU & Dumitru-Alexandru BODISLAV, 2017. "The evolution of corruption and its current state – A case study on Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(610), S), pages 99-108, Spring.
    2. Alexandru Theodoru DRONCA, 2016. "The influence of fiscal freedom, government effectiveness and human development index on tax evasion in the European Union," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 5-18, Winter.
    3. Alexandru Theodoru DRONCA, 2016. "The influence of fiscal freedom, government effectiveness and human development index on tax evasion in the European Union," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(609), W), pages 5-18, Winter.
    4. Ciprian ROTARU & Raluca GEORGESCU & Dumitru-Alexandru BODISLAV, 2017. "The evolution of corruption and its current state – A case study on Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 99-108, Spring.

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