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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. Åsa Hansson & Karin Olofsdotter, 2014. "Labor Taxation and FDI Decisions in the European Union," Open Economies Review, Springer, vol. 25(2), pages 263-287, April.
    2. 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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    6. Peter Egger & Doina Maria Radulescu, 2011. "Labor Taxation and Foreign Direct Investment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(3), pages 603-636, September.
    7. Guntram Wolff, 2007. "Foreign Direct Investment in the Enlarged EU: Do Taxes Matter and to What Extent?," Open Economies Review, Springer, vol. 18(3), pages 327-346, July.
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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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