The Impacts of Various Taxes on Foreign Direct Investment

Stacie Beck and Alexis Chaves ()
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Alexis Chaves: U.S. Bureau of Economic Analysis, U.S. Department of Commerce

No 11-18, Working Papers from University of Delaware, Department of Economics

Abstract: 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.

Keywords: Tax Ratio; Foreign Direct Investments (search for similar items in EconPapers)
JEL-codes: C33 F21 H20 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011
New Economics Papers: this item is included in nep-acc and nep-pbe
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Citations: View citations in EconPapers (6)

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