International taxation and foreign direct investment

Rahul Mukherjee

Chapter 23 in Elgar Encyclopedia of International Trade, 2026, pp 111-117 from Edward Elgar Publishing

Abstract: This article examines the complex relationship between corporate taxation and foreign direct investment (FDI), integrating insights from theoretical models, empirical evidence, and recent policy developments. It reviews how multinational corporations respond to statutory and effective corporate tax rates when making location, volume, and ownership decisions, distinguishing between horizontal and vertical FDI. The discussion addresses tax elasticity estimates, the role of tax measures in influencing greenfield and brownfield investments, and government incentives to balance FDI attraction with revenue collection. Strategic interactions between jurisdictions, including tax competition and potential “race-to-the-bottom” dynamics, are explored alongside profit-shifting practices in the digital economy. The chapter concludes with an analysis of the OECD/G20 BEPS 2.0 framework, highlighting the implications of Pillars One and Two for global tax coordination. By linking theory, evidence, and policy, it provides a comprehensive account of the FDI–tax nexus and the evolving challenges of taxing multinational enterprises.

Keywords: Foreign Direct Investment; Corporate Taxation; Tax Competition; Profit Shifting; OECD BEPS; Multinational Enterprises (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781035327508.00028 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:23076_24

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Jack Sweeney ().