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Do Bilateral Tax Treaties Promote Foreign Direct Investment?

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  • Bruce A. Blonigen
  • Ronald B. Davies

Abstract

We explore the impact of bilateral tax treaties on foreign direct investment using data from OECD countries over the period 1982-1992. We find that recent treaty formation does not promote new investment, contrary to the common expectation. For certain specifications we find that treaty formation may actually reduce investment as predicted by arguments suggesting treaties are intended to reduce tax evasion rather than promote foreign investment.

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  • Bruce A. Blonigen & Ronald B. Davies, 2002. "Do Bilateral Tax Treaties Promote Foreign Direct Investment?," NBER Working Papers 8834, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8834
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    Cited by:

    1. Ronald B. Davies & Pehr‐Johan Norbäck & Ayça Tekin‐Koru, 2009. "The Effect of Tax Treaties on Multinational Firms: New Evidence from Microdata," The World Economy, Wiley Blackwell, vol. 32(1), pages 77-110, January.
    2. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Révil, 2005. "How Does FDI React to Corporate Taxation?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(5), pages 583-603, September.
    3. Philip R. Lane & Gian Maria Milesi-Ferretti, 2008. "International Investment Patterns," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 538-549, August.
    4. Ashoka Mody, 2004. "Is FDI Integrating the World Economy?," The World Economy, Wiley Blackwell, vol. 27(8), pages 1195-1222, August.
    5. Fernando Mistura & Caroline Roulet, 2019. "The determinants of Foreign Direct Investment: Do statutory restrictions matter?," OECD Working Papers on International Investment 2019/01, OECD Publishing.
    6. Erel, Isil & Liao, Rose C. & Weisbach, Michael S., 2009. "World Markets for Mergers and Acquisitions," Working Paper Series 2009-11, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    7. Niels Johannesen & Gabriel Zucman, 2014. "The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 65-91, February.
    8. Joseph Daniels & Walid Hejazi & Marc von der Ruhr, 2005. "Regional vs. Global Financing Strategies for U.S. MNEs," Working Papers and Research 0511, Marquette University, Center for Global and Economic Studies and Department of Economics.
    9. Tom Coupé & Irina Orlova & Alexandre Skiba, 2010. "The Effect of Policies on FDI Flows to Transition Countries," Chapters, in: Robert E.B. Lucas & Lyn Squire & T. N. Srinivasan (ed.), Global Exchange and Poverty, chapter 9, Edward Elgar Publishing.
    10. Kim, Sokchea, 2006. "Bilateral Investment Treaties, Political Risk and Foreign Direct Investment," MPRA Paper 21324, University Library of Munich, Germany.
    11. Yerkezhan Akhmetzaki & Bulat Mukhamediyev, 2017. "Fdi Determinants In The Eurasian Economic Union Countries And Eurasian Economic Integration Effect On Fdi Inflows," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 959-970.
    12. Anicic, Jugoslav & Laketa, Marko & Radovic, Branka & Radovic, Dragan & Laketa, Luka, 2012. "Tax Policy Of Serbia In The Function Of Developing The Economic System," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 3(1), pages 33-43.
    13. Castillo-Murciego, Ángela & López-Laborda, Julio, 2019. "The effect of double taxation treaties and territorial tax systems on foreign direct investment: Evidence for Spain," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-33.
    14. Petr Janský & Jan Láznička & Miroslav Palanský, 2021. "Tax treaties worldwide: Estimating elasticities and revenue foregone," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 359-401, May.
    15. Adriana CAZACU, 2020. "International Double Taxation. Content, Consequences and Avoidance (I)," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 1(8), pages 62-72, August.
    16. Adriana CAZACU, 2020. "International Double Taxation. Content, Consequences and Avoidance (II)," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 1(9), pages 61-72, September.
    17. Michael Daly, 2006. "WTO Rules on Direct Taxation," The World Economy, Wiley Blackwell, vol. 29(5), pages 527-557, May.
    18. Leibrecht, Markus & Rixen, Thomas, 2020. "Double Tax Avoidance and Tax Competition for Mobile Capital," SocArXiv dgw5k, Center for Open Science.
    19. Mumtaz Hussain Shah & Saba Qayyum, 2015. "Impact of Double Taxation Treaties on Inward FDI in Latin American and Caribbean Developing Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(1), pages 1-18, April.
    20. Luo, Changyuan & Luo, Qin & Zeng, Shuai, 2022. "Bilateral tax agreement and FDI inflows: Evidence from Hong Kong investment in the Mainland China," China Economic Review, Elsevier, vol. 73(C).
    21. Mário MARQUES & Carlos PINHO, 2014. "Effects of Corporate Taxation and Bilateral Tax Treaties on European Multinationals’ Investment, 2005-2009. A Multi-Country Analysis," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(1), pages 33-44.
    22. Peter Egger & Michael Stimmelmayr, 2017. "Taxation and the Multinational Firm," CESifo Working Paper Series 6384, CESifo.

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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