Never-Ending the Application of Double Tax Treaties to Foreign Direct Investment

Abstract

Foreign Direct Investment (FDI) plays an important role in avoiding double taxation of income in the two countries. Double Tax Treaties (DTT) is the main instrument to coordinate international taxation directly or can also be called a bilateral agreement between countries. In many developing countries, DTT can inhibit FDI because they also enable the exchange of information between tax authorities. Considering that, it is an empirical question about whether DTT helps attract FDI or not, a wider and broader discussion is needed to fully comprehend the resulting dynamics in such developing countries. To this end, the current study aims at reviewing and discussing DTT and FDI, as it is considered key that the relationship between DTT and FDI is crucial for taxes revenues performance. The body of knowledge that is created here is meant to support mainly students and practitioners, but also researchers, which are addressing the problem of DTT and FDI in developing countries.