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Labor Taxes and Decision about FDI in the EU

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  • Jan Tecl

Abstract

This paper analyzes the relationship between tax variables and foreign direct investments. There are many studies with analysis of influence of corporate income tax, but only few with focus on individual taxation and social security contributions.The analysis is done for the decision if do FDI or do not do and about decision about amount of FDI. On the decision about realization of FDI has impact GDP per capita of home and partner country and distance between countries. GDP per capita of home country increase probability of location of FDI, GDP per capita and distance decrease the probability of the location of FDI in the partner country. Based on the results, on the amount of FDI have positive impact GDP variables and other variables - e.g. differences in corporate tax rate. Negative impact has distance between countries. The impact of social security payment is not obvious, because it differs based on the fact of average wage of employee (for higher than average earnings the relationship is negative, for average earnings the relationship is positive).

Suggested Citation

  • Jan Tecl, 2017. "Labor Taxes and Decision about FDI in the EU," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2017(2), pages 41-54.
    • Handle: RePEc:prg:jnlefa:v:2017:y:2017:i:2:id:180:p:41-54
    DOI: 10.18267/j.efaj.180
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    References listed on IDEAS

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    1. Sascha O. Becker & Karolina Ekholm & Robert Jäckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 693-731, December.
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    6. Erdal Demirhan & Mahmut Masca, 2008. "Determinants of foreign direct investment flows to developing countries: a cross-sectional analysis," Prague Economic Papers, Prague University of Economics and Business, vol. 2008(4), pages 356-369.
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    8. Ruud A. de Mooij & Sjef Ederveen, 2006. "What a difference does it make? Understanding the empirical literature on taxation and international capital flows," European Economy - Economic Papers 2008 - 2015 261, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. Jan Tecl, 2018. "Measurement of Labour Taxation," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2018(1), pages 5-18.

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    More about this item

    Keywords

    FDI; Taxation; Individual taxation;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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