The role of tax system complexity on foreign direct investment allocation
Leonzio Rizzo (),
Alejandro Esteller - MorÃ© and
Riccardo Secomandi ()
No 2020029, Working Papers from University of Ferrara, Department of Economics
We present new cross-country empirical evidence that tax system complexity affects international investments. The evidence comes from a database of foreign direct investment (FDI) bilateral flows for all OECD countries over the 2013 2016 period. We used the dataset from the Doing Business survey, which collects several measures of tax system complexity and effective tax rates. By means of a gravity model, we considered the impact of destination and parent country characteristics on firm investment decisions. An increase in the difference between tax complexity in the home country and the destination country is related with an increase in FDI outflows from home to destination. We also found that this effect is driven by small countries. We did not observe any impact of tax rate differentials on FDI outflows.
Keywords: FDI flows; tax complexity; gravity model (search for similar items in EconPapers)
JEL-codes: H32 H29 H25 (search for similar items in EconPapers)
Pages: 28 pages
New Economics Papers: this item is included in nep-int, nep-pub and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:udf:wpaper:2020029
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