Tax sensitivity of foreign direct investment (FDI) has important policy implications. If FDI is not responsive to taxation, then it may be an appropriate target for taxation by the host country, which can raise revenue without sacrificing any economic benefits FDI produces. This paper examines the effects of taxation on FDI in Mexico. The empirical model used for this purpose distinguishes FDI finance by transfers and retained earnings and incorporates host and home country tax and non-tax factors including host country risk factors and credit status of multinationals. The paper concludes that empirical evidence on tax sensitivity of FDI in Mexico is quite strong. It suggests that FDI transfers and reinvested earnings respond negatively to the Mexican effective tax rate and to regulations. It is further dampened by the excess credit status of multinationals. It is encouraged by a favorable economic and political climate in Mexico, as indicated by the country credit rating of TheInstitutional Investor and by tariffs.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".