Does High Corporate Tax Rates Attract Foreign Direct Investment?

Mihaela Göndör () and Paula Nistor ()
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Paula Nistor: Petru Maior University, Faculty of Economics, Tirgu Mures Alexandru Ioan Cuza University, Doctoral School of Economy, Iasi

Ovidius University Annals, Economic Sciences Series, 2012, vol. XII, issue 1, 1433-1438

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.

Keywords: Fiscal Policy; Fiscal Competition; Foreign Direct Investment; Business Environment. (search for similar items in EconPapers)
JEL-codes: F23 H32 P45 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xii:y:2012:i:12:p:1433-1438

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