New Results on the Effects of Tax Policy on the International Location of Investment

Abstract

Foreign direct investment (FDI) in the United States and U.S. direct investment abroad (DIA) are important economic phenomena as well as a source of political controversy. In 1980, FDI reached $17 billion, about 22% as large as net domestic fixed investment. Correspondingly, DIA reached $19 billion, about 25% as large as net domestic investment in plant and equipment. Since 1980, substantial FDI has continued, whereas DIA has fallen precipitously. Further, the sources of finance for FDI and the uses of earnings on DIA have changed dramatically in the past few years.These flows-in both directions-have become a concern of tax policy. For example, the adoption of the Accelerated Cost Recovery System (ACRS) in 1981, as amended in 1982, was expressly limited to investment in the United States. While the primary motivation behind ACRS was to increase U.S. domestic capital formation, a secondary concern, evidenced in the hearings preceding its adoption, was to stem the flow of U.S. investment abroad. Further, FDI is often seen as an important justification for continuing the U.S. corporate income tax, even by those who favor corporate and personal tax integration. Another example of revenue (and perhaps location of investment) concern is the per country limitation to the foreign tax credit in the administration's tax reform proposal.

Reforming the IMF to Increase FDI Led Economic Growth: The Case of Latin American and Caribbean Countries

“…The study found a strong and positive impact of the tax rate on FDI. Similar results were found by Boskin and Gale (1987), Young (1988), Murthy (1989), Grubert and Mutti (1991), Hines and Rice (1994), Gorter and Parikh (2000), and Benassy-Quere et al (2001); all find evidence to show a statistically significant impact of tax on FDI. Any form of FDI involves the process of converting currency from the home country to that of the host nation.…”

Taxation Influence on the Economic Growth

“…možnost dosáhnout na daňové úlevy (viz např. Hartman, 1984;Boskin, Gale, 1986;Slemrod, 1990;Swenson, 1994;Lanaspa, Pueyo, Sanz, 2005;Mutti, Grubert, 2004;Simmons, 2003;Buettner, Ruf, 2007;Buettner, Wamser, 2006;Keuschnigg, 2009;Mooij, Ederveen, 2003).…”

Explaining the Variation in Empirical Estimates of Tax Elasticities of Foreign Direct Investment

“…Boskin and Gale (1987) extend the Hartman analysis by using a longer time series from 1956 -1984 and alternative data for the rate of return. They also experiment with a linear instead of a log specification.…”