IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v21y2014i3p341-377.html
   My bibliography  Save this article

An Analysis of Double Taxation Treaties and their Effect on Foreign Direct Investment

Author

Listed:
  • Paul L. Baker

Abstract

Double taxation treaties (DTTs) are intended to eliminate double taxation and thereby increase foreign direct investment (FDI). DTTs are also meant to prevent tax evasion which previous literature argues has a negative effect on FDI. Using matching econometrics and a large data set of developed to less developed country-pairs, I show that despite their intentions and the significant costs of entering into DTTs, the treaties have no effect on the flows of FDI. An analysis of the treaties in conjunction with the related domestic tax legislation shows why this is the case. Developed countries unilaterally provide for the relief of double taxation and the prevention of fiscal evasion regardless of the treaty status of a host country. This eliminates the key economic benefit and the risk that these treaties would otherwise create for the FDI location decisions of multinational enterprises.

Suggested Citation

  • Paul L. Baker, 2014. "An Analysis of Double Taxation Treaties and their Effect on Foreign Direct Investment," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 21(3), pages 341-377, November.
    • Handle: RePEc:taf:ijecbs:v:21:y:2014:i:3:p:341-377
    DOI: 10.1080/13571516.2014.968454
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13571516.2014.968454
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13571516.2014.968454?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alfred A. Haug & Anh T. N. Nguyen & P. Dorian Owen, 2023. "Do the determinants of foreign direct investment have a reverse and symmetric impact on foreign direct divestment?," Empirical Economics, Springer, vol. 64(2), pages 659-680, February.
    2. Lee, Siwook & Kim, Daeyong, 2022. "The impact of tax treaties on foreign direct investment: The evidence reconsidered," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 44(3), pages 27-48.
    3. West, Ashley & Wilkinson, Brett, 2024. "What do we know about tax treaties and how can accounting research contribute?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    4. Braun, Julia & Weichenrieder, Alfons, 2015. "Does exchange of information between tax authorities influence multinationals' use of tax havens?," ZEW Discussion Papers 15-015, ZEW - Leibniz Centre for European Economic Research.
    5. Julia Braun & Martin Zagler, 2018. "The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements," The World Economy, Wiley Blackwell, vol. 41(6), pages 1478-1507, June.
    6. Petr Janský & Jan Láznička & Miroslav Palanský, 2021. "Tax treaties worldwide: Estimating elasticities and revenue foregone," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 359-401, May.
    7. Mumtaz Hussain Shah & Saba Qayyum, 2015. "Impact of Double Taxation Treaties on Inward FDI in Latin American and Caribbean Developing Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(1), pages 1-18, April.
    8. Kunka Petkova & Andrzej Stasio & Martin Zagler, 2020. "On the relevance of double tax treaties," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 575-605, June.
    9. Anh D. Pham & Ha Pham & Kim Cuong Ly, 2019. "Double Taxation Treaties as a Catalyst for Trade Developments: A Comparative Study of Vietnam’s Relations with ASEAN and EU Member States," JRFM, MDPI, vol. 12(4), pages 1-16, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gabriele Ruiu & Giovanna Gonano, 2020. "Religious Barriers to the Diffusion of Same-sex Civil Unions in Italy," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 39(6), pages 1185-1203, December.
    2. Wright, Austin L. & Sonin, Konstantin & Driscoll, Jesse & Wilson, Jarnickae, 2020. "Poverty and economic dislocation reduce compliance with COVID-19 shelter-in-place protocols," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 544-554.
    3. Guido de Blasio & Daniela Vuri, 2019. "Effects of the Joint Custody Law in Italy," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 16(3), pages 479-514, September.
    4. Graves Jennifer & McMullen Steven & Rouse Kathryn, 2018. "Teacher Turnover, Composition and Qualifications in the Year-Round School Setting," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-27, July.
    5. Alston Lee J. & Mueller Bernardo, 2018. "Priests, Conflicts and Property Rights: the Impacts on Tenancy and Land Use in Brazil," Man and the Economy, De Gruyter, vol. 5(1), pages 1-26, June.
    6. S Anukriti & Catalina Herrera‐Almanza & Praveen K. Pathak & Mahesh Karra, 2020. "Curse of the Mummy‐ji: The Influence of Mothers‐in‐Law on Women in India†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1328-1351, October.
    7. Ellison, Richard B. & Ellison, Adrian B. & Greaves, Stephen P. & Sampaio, Breno, 2017. "Electronic ticketing systems as a mechanism for travel behaviour change? Evidence from Sydney’s Opal card," Transportation Research Part A: Policy and Practice, Elsevier, vol. 99(C), pages 80-93.
    8. Yusuke Matsuki, 2016. "A Distribution-Free Test of Monotonicity with an Application to Auctions," Working Papers e110, Tokyo Center for Economic Research.
    9. Peppel-Srebrny, Jemima, 2021. "Not all government budget deficits are created equal: Evidence from advanced economies' sovereign bond markets," Journal of International Money and Finance, Elsevier, vol. 118(C).
    10. Eichengreen, Barry & Aksoy, Cevat Giray & Saka, Orkun, 2021. "Revenge of the experts: Will COVID-19 renew or diminish public trust in science?," Journal of Public Economics, Elsevier, vol. 193(C).
    11. Shvartsman, Elena & Beckmann, Michael, 2015. "Stressed by your job: What is the role of personnel policy?," Working papers 2015/15, Faculty of Business and Economics - University of Basel.
    12. MacDonald, Peter, 2013. "Labour substitution and the scope for military outsourcing," MPRA Paper 46688, University Library of Munich, Germany.
    13. Matteo Migheli, 2021. "Green purchasing: the effect of parenthood and gender," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(7), pages 10576-10600, July.
    14. Sant’Anna, Pedro H.C. & Zhao, Jun, 2020. "Doubly robust difference-in-differences estimators," Journal of Econometrics, Elsevier, vol. 219(1), pages 101-122.
    15. Laurent Didier, 2017. "South-South Trade and Geographical Diversification of Intra-SSA Trade: Evidence from BRICs," African Development Review, African Development Bank, vol. 29(2), pages 139-154, June.
    16. Bahar, Dany & Rosenow, Samuel & Stein, Ernesto & Wagner, Rodrigo, 2019. "Export take-offs and acceleration: Unpacking cross-sector linkages in the evolution of comparative advantage," World Development, Elsevier, vol. 117(C), pages 48-60.
    17. Bono, Pierre-Henri & David, Quentin & Desbordes, Rodolphe & Py, Loriane, 2022. "Metro infrastructure and metropolitan attractiveness," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    18. Marie Bjørneby & Annette Alstadsæter & Kjetil Telle, 2018. "Collusive tax evasion by employers and employees. Evidence from a randomized fi eld experiment in Norway," Discussion Papers 891, Statistics Norway, Research Department.
    19. David S. Lee & Justin McCrary & Marcelo J. Moreira & Jack Porter, 2022. "Valid t-Ratio Inference for IV," American Economic Review, American Economic Association, vol. 112(10), pages 3260-3290, October.
    20. Gary Goertz & Tony Hak & Jan Dul, 2013. "Ceilings and Floors," Sociological Methods & Research, , vol. 42(1), pages 3-40, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:21:y:2014:i:3:p:341-377. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.