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The Impacts of Various Taxes on Foreign Direct Investment

Listed author(s):
  • Stacie Beck

    ()

    (Department of Economics,University of Delaware)

  • Alexis Chaves

    ()

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

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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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
Handle: RePEc:dlw:wpaper:11-18.
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Web page: http://lerner.udel.edu/departments/economics/department-economics/

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