The Effect of Corporate Tax on Foreign Direct Investment

Yıl 2020, , 221 - 244, 27.04.2020

Gamze Öz-yalaman

https://doi.org/10.18070/erciyesiibd.597602

Cited By: 1

Öz

This paper primarily investigates the effect of corporate tax on foreign direct investment inflows using data from a panel of 35 countries over the period between 2005 and 2016. The paper finds that the impact of corporate tax rates on foreign direct investment inflows is significantly negative. Also, the paper calculates relative efficiency scores and potential recovery rates of 35 countries by using Data Envelopment Analysis in order to help policymakers about how to change corporate tax rates so that FDI becomes efficient. The results show that there are 15 countries efficient for maximizing FDI by using corporate tax rate while 20 countries are inefficient and the average efficiency scores range from 100% to 30.93%.

Anahtar Kelimeler

Corporate Tax, FDI, Panel Data, Efficiency Score

Kurumlar Vergisinin Doğrudan Yabancı Sermaye Yatırımları Üzerindeki Etkisi

Öz

Bu çalışma ilk olarak kurumlar vergisi oranlarının doğrudan yabancı sermaye yatırımlarına etkisini araştırmaktadır. Bu kapsamda çalışmada 2005- 2016 yılları için 35 ülkeye ait panel veri seti kullanılmıştır. Çalışmada kurumlar vergisi oranlarının doğrudan yabancı sermaye girişlerine olan etkisinin istatistiksel olarak anlamlı ve negatif olduğu görülmektedir. Bu çalışmada ikinci olarak, göreli olarak daha etkin doğrudan yabancı sermaye girişleri elde edebilmek için kurumlar vergisi oranının nasıl değiştirilmesi konusunda yol gösterebilmek amacıyla ülkelerin göreli etkinlik puanları ve potansiyel iyileştirme oranları hesaplanmıştır. Sonuçlar, kurumlar vergisi oranını kullanarak etkin doğrudan yabancı sermaye girişleri elde edebilen 15, elde edemeyen 20 ülkenin olduğunu göstermektedir. Ülkelerin ortalama etkinlik puanları % 100 ile % 30.93 arasında değişmektedir.

Anahtar Kelimeler

Kurumlar Vergisi, DYY, Panel Veri, Etkinlik Değerleri

Kaynakça

• Alfaro, L., Chanda, A., Kalemli-Ozcan, S., and Sayek, S. (2004). “FDI and Economic Growth,” The Role of Local Financial Markets, Journal of International Economics, 64: 113-134.
• Aziz, O.G. (2018). “Institutional Quality and FDI Inflows in Arab Economies,” Finance Research Letters, 25: 111-123.
• Aziz, O.G. and Mishra, A.V. (2016). “Determinants of FDI inflows to Arab economies,” The Journal of International Trade & Economic Development, 25(3): 325-356.
• Baldwin, R.E. (1963). “Export Technology and Development From a Subsistence Level,” The Economic Journal, 73(289): 80-92.
• Barassi, M.R. and Zhou, Y. (2012). “The Effect of Corruption on FDI: A Parametric and Non-Parametric Analysis,” European Journal of Political Economy, 28: 302-312.
• Barrios, S., Huizinga, H., Laeven, L. and Nicodème, G. (2009). “International Taxation and Multinational Firm Location Decisions,” Economic Papers 356, European Commission.
• Beck, S. and Chaves, A. (2012). “The Impacts of Various Taxes on Foreign Direct Investment,” University of Delaware, Alfred Lerner College of Business & Economics, Working Paper No. 2011-18.
• Becker, J., Fuest, C. and Riedel, N. (2012). “Corporate Tax Effects on the Quality and Quantity of FDI,” European Economic Review, 56: 1495-1511.
• Benassy-Quere, A., Fontagne, L. and Lahreche-Revil, A. (2005). “How Does FDI React to Corporate Taxation?,” International Tax and Public Finance, 12: 583–603.
• Boateng, A., Hua, X., Nisar, S. and Wu, J. (2015). “Examining the Determinants of Inward FDI: Evidence from Norway,” Economic Modelling, 47: 118-127.
• Boskin, M.J. and Gale, W.G. (1987). “New Results on the Effects of Tax Policy on the International Location of Investment,” The Effects of Taxation on Capital Accumulation, ed. Martin Feldstein, University of Chicago Press, ISBN: 0-226-24088-6: 201-222.
• Boussofiane, A., Dyson R.G. and Thanassoulis, E. (1991). “Applied Data Envelopment Analysis,” European Journal of Operational Research, 52(1): 1-15.
• Campos, N.F. and Kinoshita, Y. (2003). “Why Does FDI Go Where it Goes? New Evidence from the Transition Economies,” IMF Working Paper, WP/03/228.
• Cassou, S.P. (1997). “The Link between Tax Rates and Foreign Direct Investment,” Applied Economics, 29(10): 1295-1301.
• Chakrabarti, A. (2001). “The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions,” KYKLOS, 54: 89-114.
• Chanegriha, M., Stewart, C. and Tsoukis, C. (2017). “Identifying the Robust Economic, Geographical and Political Determinants of FDI: An Extreme Bounds Analysis,” Empirical Economics, 52: 759-776.
• Coughlin, C.C, Terza, J.V. and Arromdee, V. (1991). “State Characteristics and the Location of Foreign Direct Investment within the United States,” The Review of Economics and Statistics, 73(4): 675-683.
• Cummins, J. and Hubbard, R.G. (1995). “The Tax Sensitivity of Foreign Direct Investment: Evidence from Firm-Level Panel Data,” The Effects of Taxation on Multinational Corporations, ed. Martin Feldstein, James R. Hines Jr., R. Glenn Hubbard, University of Chicago Press, ISBN: 0-226-24095-9: 123-152.
• Delgado, M.S., McCloud, N. and Kumbhakar, S.C. (2014). “A Generalized Emprical Model of Corruption, Foreign Direct Investment, and Growth,” Journal of Macro Economics, 42: 298-316.
• Desai, M.A., Foley, C.F. and Hines Jr., J.R. (2004). “Foreign Direct Investment in a World of Multiple Taxes,” Journal of Public Economics, 88: 2727-2744.
• Devereux, M. P. (2006), “The Impact of Taxation on the Location of Capital, Firms anmd Profit: a Survey of Empirical Evidence,” Oxford University Centre for Business Taxation Working Paper Series, WP07/02.
• Drabek, Z. and Payne, W. (2002). “The Impact of Transparency on Foreign Direct Investment,” Journal of Economic Integration, 17 (4): 777-810.
• Edwards, S. (1990). “Capital Flows, Foreign Direct Investment, and Debt-Equity Swaps in Developing Countries,” NBER Working Paper Series, No. 3497.
• Gastagana, V.M., Nugent, J.B., and Pashamova, B. (1998). “Host Country Reforms and FDI Inflows: How Much Difference Do They Make?,” World Development, 26(7): 1299-1314.
• Grubert, H.and Mutti, J. (1991). “Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making,” The Review of Economics and Statistics, 73(2): 285-293.
• Habib, M. and Zurawicki, L. (2002). “Corruption and Foreign Direct Investment,” Journal of International Business Studies, 33(2): 291-307.
• Hartman, D.G. (1984). “Tax Policy and Foreign Direct Investment in the United States,” National Tax Journal, 37(4): 475-487.
• Helmy, H.E. (2013), “The Impact of Corruption on FDI: Is MENA an Exception?,” International Review of Applied Economics, 27(4): 491-514.
• Hines, J.R., Jr. (1996a). “Tax Policy and the Activities of Multinational Corporations,” NBER Working Paper Series, No. 5589.
• Hines, J.R., Jr. (1996b). “Taxes and the Location of Foreign Direct Investment in America,” American Economic Review, 86(5): 1076-1094.
• Klein, M.W. and Rosengren, E. (1994). “The Real Exchange Rate and Foreign DirectInvestment in the United States: Relative Wealth vs. Relative Wage Effects,” Journal of International Economics, 36: 373-389.
• Lawless, M., McCoy, D., Morgenroth, E. and O’Toole, C. (2014). “The Importance of Corporation Tax Policy in the Location Choices of Multinational Firms,” An Roinn Airgeadais, Department of Finance, Economic and Social Research Institute.
• Merz, J., Overesch, M. and Wamser, G. (2017). “The Location of Financial Sector FDI: Tax and Regulation Policy,” Journal of Banking and Finance, 78: 14-26.
• Murthy, N.R.V. (1989). “The Effects of Taxes and Rates of Return on Foreign Direct Investment in the United States: Some Econometric Comments,” National Tax Journal, 42(2): 205-207.
• Nielson, B.B., Asmussen, C.G. and Weatherall, C.D. (2017). “The Location Choice of Foreign Direct Investments: Emprical Evidence and Methodological Challenges,” Journal of World Business, 52: 62-82.
• OECD (2008). Benchmark Definition of Foreign Direct Investment, Fourth Edition.
• Seyoum, B. (2011). “Informal Institutions and Foreign Direct Investment,” Journal of Economic Issues, 45(4): 917-940.
• Slemrod, Joel B. (1990). “Tax Effects on Foreign Direct Investment in the United States: Evidence from a Cross-Country Comparison,” Taxation in the Global Economy, ed. Assaf Razin and Joel Slemrod, University of Chicago Press, ISBN: 0-226-70591-9: 79-122.
• Spengel, C., Schmidt, F., Heckemeyer, J. and Nicolay, K. (2016). “Effective Tax Levels Using The Devereux/Griffith Methodology,” Final Report 2016, ZEW Centre for European Economic Research.
• Swenson, D.L. (1994). “The Impact of U.S. Tax Reform on Foreign Direct Investment in the United States,” Journal of Public Economics, 54: 243-266.
• Taxation Trends in the European Union (2016). Data For The Eu Member States, Iceland and Norway, 2016 Edition.
• Tebaldi, E. (2011). “The Determinants of High-Technology Exports: A Panel Data Analysis,” Atlantic Economic Journal, 39(4): 343-353
• The World Bank, World Development Indicators.
• The World Bank. Helping Countries Combat Corruption, The Role of World Bank, September 1997.
• Tian, Y. (2018). “Optimal Policy for Attracting FDI: Investment Cost Subsidy versus Tax Rate Reduction,” International Review of Economics and Finance, 53: 151-159.
• Transparency International, Corruption Perception Index.
• Transparency International, (2014). The Impact of Corruption on Growth and Inequality.
• Villaverde, J. and Maza, A. (2012). “Foreign Direct Investment in Spain: Regional Distribution and Determinants,” International Business Review, 21: 722-733.
• Wheeler, D. and Mody, A. (1992). “International Investment Location Decisions: The Case of U.S. Firms,” Journal of International Economics, 33: 57-76.
• Yang, J.Y.Y, Groenewold, N. and Tcha, M. (2000). “The Determinants of Foreign Direct Investment in Australia,” The Economic World, 76 (232): 45-54.
• Young, K.H. (1988). “The Effects of Taxes and Rates of Return on Foreign Direct Investment in the Unites States,” National Tax Journal, 41(1): 109-121.
• Yuan, Y., Chen, Y. and Wang, L. (2010). “Size of Government and FDI: An Empirical Analysis based on the Panel Data of 81 Countries,” Journal of Technology Management in China, 5(2): 176-184.