The Effect of Foreign Direct Investment on Tax Revenue

Abdramane Camara ()
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Abdramane Camara: University Clermont Auvergne, CNRS, IRD, CERDI

Comparative Economic Studies, 2023, vol. 65, issue 1, No 6, 168-190

Abstract: Abstract Internal resource mobilization remains a big challenge for developing countries. While many studies have attempted to highlight several strategies to increase tax revenues, the contribution of foreign direct investment (FDI) inflows in this process has received little attention. This paper provides an empirical answer to the crucial role of FDI inflows in tax revenue mobilization. Using a System GMM estimator for 90 developing countries from 1996 to 2017, our results strongly suggest that FDI inflows lead to a significant tax revenue increase. Nevertheless, this effect is not observed in resource-exporting countries where tax revenues seem statistically insensitive to FDI inflows.

Keywords: Foreign direct investment; Tax revenue; System GMM; Resource exporting countries (search for similar items in EconPapers)
JEL-codes: E62 F21 H20 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41294-022-00195-2

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