Taxes and Foreign Direct Investment Attraction: A Literature Review

Tavares-Lehmann, Ana Teresa; Coelho, Ângelo; Lehmann, Frederick

doi:10.1108/s1745-8862(2012)0000007007

Cited by 18 publications

(14 citation statements)

References 19 publications

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“…We provide a brief overview to set the stage for our application of the two quasi-experimental methods. Many scholars provide extensive reviews of dozens of studies on the topic (see, e.g., De Mooij & Ederveen, 2003, 2008Devereux, 2007;Hines, 1996;Tavares-Lehmann, Coelho, & Lehmann, 2012).…”

Section: Brief Literature Review On Taxation and Fdimentioning

confidence: 99%

“…Such incongruence in belief and perception between policymakers and managers is puzzling. Further adding confusion to the puzzle, empirical studies from the 1950s to the 1990s produced mixed findings and yet in the past decade and a half, most, though not all, econometric studies appeared to show that lower tax rates encourage more FDI (De Mooij & Ederveen, 2003, 2008Devereux, 2007;Hines, 1996Hines, , 1999Tavares-Lehmann, Coelho, & Lehmann, 2012).…”

Section: Introductionmentioning

confidence: 99%

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Corporate Tax Cuts and Foreign Direct Investment

Baccini¹,

Li²,

Mirkina³

2014

J Policy Anal Manage

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Accurate policy evaluation is central to optimal policymaking, but difficult to achieve. Most often, analysts have to work with observational data and cannot directly observe the counterfactual of a policy to assess its effect accurately. In this paper, we craft a quasi‐experimental design and apply two relatively new methods—the difference‐in‐differences estimation and the synthetic controls method—to the policy debate on whether corporate tax cuts increase foreign direct investment (FDI). The taxation–FDI relationship has attracted wide attention because of mixed findings. We exploit a quasi‐experimental design for Russian regions, which were granted autonomy to reduce corporate profit tax in 2003, enabling them to simultaneously experiment with different tax policies. We estimate both the average and local treatment effects of two types of tax cuts on FDI inflows. We find that, on average, relative to the absence of tax cuts, nondiscriminatory tax cuts on direct investment profit increase FDI, but discriminatory tax cuts on selected government‐sanctioned investment projects do not. Yet for both types of tax cuts, local treatment effects vary dramatically from region to region. Our research has important implications for the design of tax policy and fiscal incentive, and the assessment of fiscal policy reforms.

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Section: Brief Literature Review On Taxation and Fdimentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Corporate Tax Cuts and Foreign Direct Investment

Baccini¹,

Li²,

Mirkina³

2014

J Policy Anal Manage

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“…The study concludes that firms choose locational destinations based on three factors: ownership (O), location (L) and internalisation (I). Tavares-Lehmann, Coelho, & Lehmann (2012) classify tax incentives under the locational advantages of a host nation in attraction of FDI. Hence tax incentives increase the host country's attractiveness to investment if they lower tax rates below the investor's home country tax rates or if they lower tax rates below those of other competing destinations.…”

Section: Early Theoretical Arguments For Introduction Of Tax Incentivesmentioning

confidence: 99%

“…Hence tax incentives increase the host country's attractiveness to investment if they lower tax rates below the investor's home country tax rates or if they lower tax rates below those of other competing destinations. Devereux (2006) in Tavares-Lehmann et al (2012) conducted a study on the analysis of empirical evidence on the effects of taxation on investment location decisions of MNEs and concludes that taxation plays a role in affecting MNEs' choices; however, taxes were found not to be equally important in all MNEs' locational decisions. Efficiency-seeking FDI was found to be more responsive to tax incentives than resource-seeking FDI.…”

Section: Early Theoretical Arguments For Introduction Of Tax Incentivesmentioning

confidence: 99%

Do tax incentives matter for investment? A literature review

Munongo¹,

Akanbi²,

Robinson³

2017

BEH

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Abstract:The effectiveness of tax incentives in attracting FDI remains one of the unsettled concepts in public finance. The importance of tax incentives in attraction of internationally mobile capital differs with the jurisdiction of the study and the methodology used in drawing conclusions. This study in reviewing both theoretical and empirical literature seeks to establish the merits and demerits of tax incentives. This is because though they receive a lot of criticism tax incentives continue to be used in most economies. Most of the empirical studies that this study explored concluded that though tax incentives might be important in attracting FDI they are more effective when combined with other non-tax factors. Macroeconomic conditions, infrastructure and strong institutions were found to be important non-tax factors that improve the attractiveness of an economy to FDI. The major weaknesses of using taxes in attracting FDI were discussed using the tax competition and tax harmonisation framework. Here it was noted that the use of tax incentives to attract FDI might improve the welfare of individuals in the jurisdiction that apply the incentives, but have external cost implications for residents in other competing jurisdictions that do not adopt tax incentives.JEL Classifications: E61, E62, H20, H25

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“…Some researchers have drawn attention to the fact that the representatives of the state and policies tend to stick to a firm conviction of the relatively high importance of tax policy as an instrument for attracting investment. But they believe that tax incentives are not the most important factor in making investment decisions and play a secondary role, compared with other determinants, and questioned the argument that lower taxes increase investment attractiveness [13,14]. Others connect the stimulation role of taxes with specific phases of the economic cycle [15], the level of economic development of countries [16], industry characteristics [17], the quality of state management [18], etc.…”

Section: Resultsmentioning

confidence: 99%

Rental and Investment Regulation of Mining Companies in Subsoil Developing Industries

Alexandrov

Yablonev

2019

E3S Web Conf.

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Despite the fact that the problem of rental regulation of more and more becomes the object of scientists and practitioners attention, however, with regard to the results of the study of mining still cannot serve as a robust theoretical basis for the development of practical steps towards the establishment of organizational and economic relations and mechanisms, which would be able to determine the investment attractiveness of extractive activities and, consequently – the motivation to sustainable development. This is largely due to the fact that economic relations in mineral extracting industries, unlike other fields of activity are special. Their determinant is the existence of two types of band property relations, folding, firstly, regarding the ownership and administration of mineral resources, and, secondly, with regard to their use by entrepreneur as object of management. Therefore, between the owner of the subsoil and economic entity, there are special, rental relations in which inherently embedded contradiction in interests. It must and can be resolved solely on the principles of consensus and, we believe, through the institutionalization of these relations, their regulation and administration.

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Taxes and Foreign Direct Investment Attraction: A Literature Review

Cited by 18 publications

References 19 publications

Corporate Tax Cuts and Foreign Direct Investment

Corporate Tax Cuts and Foreign Direct Investment

Do tax incentives matter for investment? A literature review

Rental and Investment Regulation of Mining Companies in Subsoil Developing Industries

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