Title

An empirical study of the impact of corporate taxation on the global allocation of foreign direct investment : a broad tax attractiveness index approach

Document Type

Journal article

Source Publication

Journal of International Accounting, Auditing and Taxation

Publication Date

12-1-2003

Volume

12

Issue

2

First Page

105

Last Page

120

Keywords

Corporate taxation, FDI inflows

Abstract

The question of whether a country's corporate tax regime has a significant influence on the level of foreign direct investment (FDI) into that country is an important consideration in the design of national tax policy. This is especially relevant today in view of the recent increase in the global mobility of capital and subsequent increase in the importance of FDI to nations' economies. Although several prior quantitative studies have investigated the link between taxation and FDI, they have tended to be restricted in geographical scope and in their measure of taxation.This study constructs indices of "corporate tax attractiveness" for selected countries and then analyses the relationship between the indices and measures of the flow of FDI into those countries. The indices are constructed by obtaining evaluations from international investors and taxation experts on the various attributes of the tax systems of those selected countries. A significant positive relationship was found to exist between the indices and measures of FDI inflows, and between individual tax system attributes and those inflows, thus adding support to the supposition that host country corporate taxation influences the size of FDI inflows.

DOI

10.1016/j.intaccaudtax.2003.08.005

Print ISSN

10619518

E-ISSN

18791603

Publisher Statement

Copyright © 2003 Elsevier Inc

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Full-text Version

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Recommended Citation

Simmons, R. S. (2003). An empirical study of the impact of corporate taxation on the global allocation of foreign direct investment: A broad tax attractiveness index approach. Journal of International Accounting, Auditing & Taxation, 12(2), 105-120. doi: 10.1016/j.intaccaudtax.2003.08.005