Corporate Tax Incentives and FDI in Developing Countries

Andersen, Maria Reinholdt; Kett, Benjamin R.; Uexküll, Erik von

doi:10.1596/978-1-4648-1175-3_ch3

Cited by 32 publications

(31 citation statements)

References 16 publications

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“…Tax incentives are more effective in attracting efficiency-seeking FDIs motivated by lower production costs than for other types of investment. Nevertheless, many developing countries offer incentives to all investors, including those motivated by access to natural resources or the domestic market, who are normally less likely to respond to incentives (Andersen et al, 2017). This is in line with the study by OECD (2013), in which incentives are in place to attract foreign investors to Central Asia.…”

Section: Random and Fixed Effects Methodssupporting

confidence: 60%

The determinants of foreign direct investment in Central Asian region: A case study of Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan (A quantitative analysis using GMM)

Sharofiddin¹,

Othman²,

Rosman³

et al. 2020

RUJEC

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Foreign direct investment (FDI) is viewed as one of the most crucial forms of capital inflows and significant drivers of economic growth in numerous countries. In particular, developing countries, emerging economies and countries engaged in the process of development have recognized the crucial importance of FDI as a critical contributor to their economic progress and increasing economic opportunities. The following research investigated and identified the determinants of FDI in the Central Asian countries, specifically Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan, between 2000 and 2017. The methodology employed in the first part included comparative analysis of the foreign investment trends and gross domestic product (GDP), as well as an endogenous growth model. The result showed that five variables are robustly significant of FDI determinants: FDI (previous year), GDP, labor force, trade openness and tax. Additionally, this paper demonstrates that among the most significant FDI contributors are China, Russia and Japan as well as European countries because of the economic opportunities available; however, the USA is considered by Central Asian countries to offer the most opportunities for security control considerations rather than economic opportunities. Furthermore, the results suggest that the authorities in the Central Asia region should enhance the stability of their economic growth, labor force, trade openness and tax regulations to attract more FDI to the region.

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Section: Random and Fixed Effects Methodssupporting

confidence: 60%

The determinants of foreign direct investment in Central Asian region: A case study of Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan (A quantitative analysis using GMM)

Sharofiddin¹,

Othman²,

Rosman³

et al. 2020

RUJEC

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“…A profit-based incentive lowers the tax rate for any amount of profit earned by an investor. Thus, the value of the incentive is a direct function of the company's profits, which results in the incentive favouring firms with high profits and therefore least in need of an incentive to invest (Andersen et al, 2017). A profitbased incentive is also more likely to be redundant.…”

Section: Cost-based Vs Profit-based Tax Incentivesmentioning

confidence: 99%

“…A cost-based incentive is independent of the profit level of a company and instead focuses on lowering the cost of capital, which increases the chances that project is profitable; cost-based incentives thus are more likely to stimulate investment that would not have occurred without such incentives. Cost-based incentives are also encouraged because tax revenue loss is more predictable, and they are less likely to be abused (Andersen et al, 2017).…”

Section: Cost-based Vs Profit-based Tax Incentivesmentioning

confidence: 99%

Guide on incentives for responsible investment in agriculture and food systems

Bulman

Cordes

Mehranvar³

et al. 2021

SSRN Journal

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The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO) or Columbia University concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by FAO or Columbia University in preference to others of a similar nature that are not mentioned.The views expressed in this information product are those of the author(s) and do not necessarily reflect the views or policies of FAO or Columbia University.

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“…IMF (2015), UN (2015) and World Bank ( 2015) studies find that tax incentives are lowly ranked in investment climate surveys, mostly redundant and most investments would have taken place without them (see James, 2009;and James, 2013). Andersen et al (2017) reveal that the impact of incentives on FDI depends on the nature of the investment in the first place. Tax incentives are more effective in attracting efficiency-seeking FDI focusing on lowering production cost but not for those investments attracted by domestic markets and natural resources.…”

Section: Literature Reviewmentioning

confidence: 99%

Tax Incentives Policy, Firm Investment, Firm exports, and Gross Output: Panel Econometric Modelling

Mutuku¹,

Sirengo²,

Omar³

2021

JEPF

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A panel econometric model consisting of 118,380 firms, spanning 2014 to 2019 was used to determine the impact of tax incentive policy on firm investment, firm gross output, and exports. A two-stage modelling approach was used, first the decision to invest or export was modelled using a binary logit model. In the second phase, the impact of the tax incentives policy was estimated. The decisions to export and invest are marginally driven by tax incentive policy. A shilling given as tax expenditure increases the probability of investing and exporting by 0.018% and 0.48% respectively. The results from the study imply that export and investment-related tax incentives are either redundant or have a negligible impact on their respective target variables.

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Corporate Tax Incentives and FDI in Developing Countries

Cited by 32 publications

References 16 publications

The determinants of foreign direct investment in Central Asian region: A case study of Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan (A quantitative analysis using GMM)

The determinants of foreign direct investment in Central Asian region: A case study of Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan (A quantitative analysis using GMM)

Guide on incentives for responsible investment in agriculture and food systems

Tax Incentives Policy, Firm Investment, Firm exports, and Gross Output: Panel Econometric Modelling

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