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The Impacts of Various Taxes on Foreign Direct Investment

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  • Stacie Beck

    (Department of Economics,University of Delaware)

  • Alexis Chaves

    (U.S. Bureau of Economic Analysis, U.S. Department of Commerce)

Abstract

Previous work on the effect of taxes on foreign direct investment (FDI) focused primarily on capital income taxes. We investigate the proposition that other forms of taxation may also deter FDI. We use tax ratios, i.e., average effective tax rates, on consumption, labor and capital income for a panel of 25 OECD countries from 1975-2006. We find that increases in relative tax rates on capital income encourage net FDI outflow whereas increases in labor income tax rates have the opposite effect. Increases in relative consumption tax rates have insignificant impacts.

Suggested Citation

  • Stacie Beck & Alexis Chaves, 2011. "The Impacts of Various Taxes on Foreign Direct Investment," Working Papers 11-18, University of Delaware, Department of Economics.
    • Handle: RePEc:dlw:wpaper:11-18.
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    References listed on IDEAS

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    3. Igor M. Drapkin, 2020. "The Influence of Taxes on Inflows and Outflows of Foreign Direct Investment," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(3), pages 224-255.
    4. Hale Akbulut & Ahmet Burcin Yereli, 2017. "FDI and Indirect Taxes - Sector Approach: The Case of Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 112-118.
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    6. Makmun Syadullah & Akhmad Yasin, 2019. "The Dominant Factors Influencing the Flow of Foreign Direct Investment to Indonesia," Journal of Social and Development Sciences, AMH International, vol. 9(4), pages 36-42.

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    More about this item

    Keywords

    Tax Ratio; Foreign Direct Investments;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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