The effect of tax complexity on foreign direct investment inflows (조세복잡성이 해외직접투자의 유입에 미치는 영향)

Kang, Seok-Min (강석민)

doi:10.22971/jois.31..202006.195

The effect of tax complexity on foreign direct investment inflows

JOURNAL OF INTERNATIONAL STUDIES
Abbr : jois
2020, 31(), pp.195~214
DOI : 10.22971/jois.31..202006.195
Publisher : The Keimyung Institute for International Studies
Research Area : Social Science > Area Studies > Regional Studies in general
Published : June 30, 2020

Kang, Seok-Min ¹

¹계명대

Candidate

ABSTRACT

It has been generally reported that corporate tax of the host country is negatively associated with foreign direct investment inflows. However, characteristics of tax system in the host country could be a crucial factor because foreign firms should understand and comply with various requirements if they enter in the host country. There is little study for investigating the relationship between tax system of the host country and foreign direct investment inflows. Therefore, this study examined the effect of tax system of the host country on foreign direct investment. Using OLS estimation, this study found the negative impact of tax system on foreign direct investment inflows. Dealing with the heteroscedasticity and autocorrelation of the error term by using feasible GLS, this study still reported the negative effect of tax system, and its negative effect was robust in using OLS and feasible GLS with first differentiation to control for heterogeneity of the host countries. However, when high income and low income countries were categorized by the average of their income, the effect of tax system was negatively associated with foreign direct investment in high income countries, but not in low income country. This empirical result shows that complexity of tax system is an important factor attracting foreign direct investment to high income country but not to low income country. Maybe, the other factors (such as market size, corruption, and so on) would be more or less crucial to low income country.

KEYWORDS

tax complexity, foreign direct investment, heteroscedasticity, autocorrelation

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* References for papers published after 2024 are currently being built.

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JOURNAL OF INTERNATIONAL STUDIES 2024 KCI Impact Factor : 0.74

The effect of tax complexity on foreign direct investment inflows

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* References for papers published after 2024 are currently being built.

JOURNAL OF INTERNATIONAL STUDIES 2024 KCI Impact Factor : 0.74

The effect of tax complexity on foreign direct investment inflows

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