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The Impact of Corporate Taxation on Foreign Direct Investment: a Survey

Author

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  • Svetlana Raudonen

    (Department of Economics at Tallinn University of Technology)

Abstract

This paper reviews the literature on factors influencing the allocation of foreign direct investments, with respect to the significant role of corporate taxation policy. The review includes Bucovetskyís tax competition model where countries are assumed to be asymmetric. Empirical studies of S∠rensen (2000), Root and Ahmed (1978), Mooij and Ederveen (2003) are touched upon in the survey. The paper helps to understand the importance of tax policy in attracting foreign investments to the country. The survey assumes effective enforcement to highlight the impact of taxation on foreign investment.

Suggested Citation

  • Svetlana Raudonen, 2008. "The Impact of Corporate Taxation on Foreign Direct Investment: a Survey," Working Papers 182, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    • Handle: RePEc:ttu:wpaper:182
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    References listed on IDEAS

    as
    1. Hannes Winner, 2005. "Has Tax Competition Emerged in OECD Countries? Evidence from Panel Data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(5), pages 667-687, September.
    2. de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 673-693, November.
    3. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
    4. Michael J. Boskin & William G. Gale, 1987. "New Results on the Effects of Tax Policy on the International Location of Investment," NBER Chapters, in: The Effects of Taxation on Capital Accumulation, pages 201-222, National Bureau of Economic Research, Inc.
    5. Lahiri, Sajal & Ono, Yoshiyasu, 1998. "Foreign Direct Investment, Local Content Requirement, and Profit Taxation," Economic Journal, Royal Economic Society, vol. 108(447), pages 444-457, March.
    6. Tung, Samuel & Cho, Stella, 2001. "Determinants of Regional Investment Decisions in China: An Econometric Model of Tax Incentive Policy," Review of Quantitative Finance and Accounting, Springer, vol. 17(2), pages 167-185, September.
    7. Nicodeme, Gaetan, 2006. "Corporate Tax Competition and Coordination in the European Union: What do we know? Where do we stand?," MPRA Paper 107, University Library of Munich, Germany.
    8. Frey, Bruno S. & Eichenberger, Reiner, 1996. "To harmonize or to compete? That's not the question," Journal of Public Economics, Elsevier, vol. 60(3), pages 335-349, June.
    9. Peter Birch Sørensen, 2000. "The case for international tax co-ordination reconsidered," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(31), pages 430-472.
    10. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
    11. John R. Graham, 2003. "Taxes and Corporate Finance: A Review," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1075-1129.
    12. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    impact of tax policy; foreign direct investments; determinants of foreign direct investments; tax competition;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F2 - International Economics - - International Factor Movements and International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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