The Disappearing Tax Base: Is Foreign Direct Investment (FDI) Eroding Corporate Income Taxes?
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Summary:
This paper analyzes the link between FDI, corporate taxation, and corporate tax revenues. We find strong evidence that FDI in (out) flows are affected by tax regimes in the host (home) countries and FDI flows in turn affect the corporate tax base. Simulations of European Union (EU) harmonization (isolating the revenue effect of FDI on the tax base from direct effects through the rate harmonization) suggest that high (low) tax countries would gain (lose) revenue from harmonization; these effects may be substantial. Our results also suggest that EU tax harmonization would significantly affect the net FDI position of some countries.
Series:
Working Paper No. 2000/173
Subject:
Balance of payments Corporate income tax Corporate taxes Foreign direct investment Revenue administration Tax harmonization Taxes
English
Publication Date:
October 1, 2000
ISBN/ISSN:
9781451858624/1018-5941
Stock No:
WPIEA1732000
Pages:
39
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