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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.

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File URL: http://graduate.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2011/UDWP2011-18.pdf
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Bibliographic Info

Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 11-18.

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Length: 30 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:dlw:wpaper:11-18.

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Postal: Purnell Hall, Newark, Delaware 19716
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Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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Keywords: Tax Ratio; Foreign Direct Investments;

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References

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  16. Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1, October.
  17. Dana Hajkova & Giuseppe Nicoletti & Laura Vartia & Kwang-Yeol Yoo, 2006. "Taxation and business environment as drivers of foreign direct investment in OECD countries," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 7-38.
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