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Does High Corporate Tax Rates Attract Foreign Direct Investment?

Author

Listed:
  • Mihaela Göndör

    (Petru Maior University, Faculty of Economics, Tirgu Mures)

  • Paula Nistor

    (Petru Maior University, Faculty of Economics, Tirgu Mures Alexandru Ioan Cuza University, Doctoral School of Economy, Iasi)

Abstract

A part of the empirical literature seems to support the view that international differences in corporate taxation are important determinants of FDI location, while another part argue that FDI are attracted by the business environment, without taking into consideration any directly or indirectly influence of fiscal policy. In this context, the aim of the present paper is to analyze the relation between corporate tax rates competition and Foreign Direct Investment location and to offer conjectures as to the reasons behind. In this purpose the paper analyze the evolution of FDI in European Union, in the developed and emerging economies together with the national differences in corporate taxation, for the period 2005-2010. The study’s results suggest that fiscal competition between governments for FDI is not necessarily a corporate tax rates competition, but a business environment one, which is determined primarily by fiscal policy.

Suggested Citation

  • Mihaela Göndör & Paula Nistor, 2012. "Does High Corporate Tax Rates Attract Foreign Direct Investment?," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 1433-1438, May.
    • Handle: RePEc:ovi:oviste:v:xii:y:2012:i:12:p:1433-1438
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    More about this item

    Keywords

    Fiscal Policy; Fiscal Competition; Foreign Direct Investment; Business Environment.;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

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