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THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT

Year 2018, Volume: 40 Issue: 1, 1 - 13, 27.06.2018

Berna Hızarcı Beşer Mustafa Kemal Beşer

https://doi.org/10.14780/muiibd.434909
Cited By: 1

Abstract

Main aim of this paper is to investigate the effect of corporate income tax rates on foreign direct

investment (FDI) in the countries which has flat tax application in the pattern of long-run relationship

of FDI and its determinants which are known as market size, labor cost, trade barrier, growth rate,

openness, trade deficit, and tax rates. For the empirical analysis we use annual data for 1990-2014 for the

countries which have applied flat tax reforms and smaller corporate income tax rates in order to focus

and draw out the effect of tax rate instrument on capital movements in the point of tax competition.

According to panel regression and cointegration results, corporate tax rate has significant and negative

impact on FDI.

Keywords

Flat Tax Tax Competition Foreign Direct Investment

References

  • BOSKIN, M.J., William G.G. (1987). New Results on the Effects of Tax Policy on the International Location of Investment. The Effects of Taxation on Capital Accumulation, Ed: M. Feldstein, Univ. of Chicago Press, Chicago.
  • CHAKRABARTI, A. (2001). The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross- Country Regressions, KYKLOS, 54(1): 89–114.
  • DESAI, M.A., Foley, C.F., Hines, J.R. (2004). Foreign Direct Investment in a World of Multiple Taxes, Journal of Public Economics, 88(12): 2727-2744.
  • ENGLE, R.F., Granger, C.W.J. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing, Econometrica, 55(2): 251-276.
  • ENGLE, R.F., Yoo, B.S. (1987). Forecasting and Testing in Co-integrated Systems, Journal of Econometrics, 35(1): 143-159.
  • FERHATOĞLU, E. (2006). Avrupa’da Düz Oranlı Vergi Sistemi Çalışmaları ve Başarısı, Vergi Dünyası, 25(298): 170-176.
  • GRANGER, C.W.J. (1981). Some Properties of Time Series Data and Their Use in Econometric Model Specification, Journal of Econometrics, 16: 121–130.
  • HALL, R.E., Rabushka, A. (1983). Low Tax, Simple Tax, Flat Tax, McGraw-Hill, New York.
  • HALL, R.E., Rabushka, A. (1985). The Flat Tax, Stanford, Calif., Hoover Institution Press.
  • IM, K.S., Pesaran, M.H., Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels, Journal of Econometrics, 115(1): 53–74.
  • JOHANSEN, S. (1988). Statistical Analysis of Cointegration Vectors, Journal of Economics Dynamic and Control, 12(2-3): 231–254.
  • KAO, C. (1999). Spurious Regression and Residual-Based Tests for Cointegration in Panel Data, Journal of Econometrics, 90(1): 1–44.
  • LARSSON, R, Lyhagen J. (1999). Likelihood-Based Inference in Multivariate Panel Cointegration Models, Stockholm School of Economics, Working Paper Series in Economics and Finance, No:331.
  • LARSSON, R, Lyhagen, J., Löthgren, M. (2001). Likelihood-Based Cointegration Tests in Heterogeneous Panels, Econometrics Journal, 4(1): 109-142.
  • LEVIN, A., Lin, C.F., Chu, C.S. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties, Journal of Econometrics, 108(1): 1–24.
  • MADDALA, G.S., Wu, S. (1999). A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test, Oxford Bulletin of Economics and Statistics, 61: 631–652.
  • MCCOSKEY, S., Kao, C. (1998). A Residual-Based Test of the Null of Cointegration in Panel Data, Econometric Reviews, 17(1): 57–84.
  • NING, Y., Reed, M.R. (1995). Locational Determinants of U.S. Direct Foreign Investment in Food and Kindered Products, Agrobusiness, 11(1): 77- 85.
  • PAULUS, A., Peichl, A. (2008). Effects of Flat Tax Reforms in Western Europe on Equity and Efficiency, ISER Discussion Paper, 2008-06.
  • PEDRONI, P. (1995). Panel Cointegration; Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis, Indiana Univ. WP in Economics, No: 95–013.
  • PEDRONI, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors, Oxford Bulletin of Economics and Statistics, 61(S1): 653–670.
  • PEDRONI, P. (2004). Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis: New Results, Econometric Theory, 20(3): 597–625.
  • PORCANO, T.M., Price, C.E. (1996). The Effects of Government Tax and Nontax Incentives on Foreign Direct Investment, Multinational Business Review, 4(1): 9-20.
  • SARISOY, İ., Koç, S. (2010). Doğrudan Yabancı Sermaye Yatırımlarının Kurumlar Vergisi Gelirleri Üzerindeki Etkisinin Ekonometrik Analizi, Erciyes Üniversitesi İİBF Dergisi, 36: 133-153.
  • SAYGIN, Ö., (2013). Gelir Vergisi Tarifesinin Esneklik Analizi: Türkiye Üzerine Bir Değerlendirme, Vergi Sorunları Dergisi, 301: 175-186.
  • SWENSON, D.L. (2004). The Impact of U.S. Tax Reform on Foreign Direct Investment in the United States, Journal of Public Economics, 54(2): 243-266.
  • The World Bank, World Development Indicators, http://databank.worldbank.org /data/reports. Erişim Tarihi (31.07.2016)
  • Trading Economics, https://tradingeconomics.com, Erişim Tarihi (31.07.2016)

THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT

Year 2018, Volume: 40 Issue: 1, 1 - 13, 27.06.2018

Berna Hızarcı Beşer Mustafa Kemal Beşer

https://doi.org/10.14780/muiibd.434909
Cited By: 1

Abstract

Main aim of this paper is to investigate the effect of corporate income tax rates on foreign direct

investment (FDI) in the countries which has flat tax application in the pattern of long-run relationship

of FDI and its determinants which are known as market size, labor cost, trade barrier, growth rate,

openness, trade deficit, and tax rates. For the empirical analysis we use annual data for 1990-2014 for the

countries which have applied flat tax reforms and smaller corporate income tax rates in order to focus

and draw out the effect of tax rate instrument on capital movements in the point of tax competition.

According to panel regression and cointegration results, corporate tax rate has significant and negative

impact on FDI.

Keywords

Flat Tax Tax Competition Foreign Direct Investment

References

  • BOSKIN, M.J., William G.G. (1987). New Results on the Effects of Tax Policy on the International Location of Investment. The Effects of Taxation on Capital Accumulation, Ed: M. Feldstein, Univ. of Chicago Press, Chicago.
  • CHAKRABARTI, A. (2001). The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross- Country Regressions, KYKLOS, 54(1): 89–114.
  • DESAI, M.A., Foley, C.F., Hines, J.R. (2004). Foreign Direct Investment in a World of Multiple Taxes, Journal of Public Economics, 88(12): 2727-2744.
  • ENGLE, R.F., Granger, C.W.J. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing, Econometrica, 55(2): 251-276.
  • ENGLE, R.F., Yoo, B.S. (1987). Forecasting and Testing in Co-integrated Systems, Journal of Econometrics, 35(1): 143-159.
  • FERHATOĞLU, E. (2006). Avrupa’da Düz Oranlı Vergi Sistemi Çalışmaları ve Başarısı, Vergi Dünyası, 25(298): 170-176.
  • GRANGER, C.W.J. (1981). Some Properties of Time Series Data and Their Use in Econometric Model Specification, Journal of Econometrics, 16: 121–130.
  • HALL, R.E., Rabushka, A. (1983). Low Tax, Simple Tax, Flat Tax, McGraw-Hill, New York.
  • HALL, R.E., Rabushka, A. (1985). The Flat Tax, Stanford, Calif., Hoover Institution Press.
  • IM, K.S., Pesaran, M.H., Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels, Journal of Econometrics, 115(1): 53–74.
  • JOHANSEN, S. (1988). Statistical Analysis of Cointegration Vectors, Journal of Economics Dynamic and Control, 12(2-3): 231–254.
  • KAO, C. (1999). Spurious Regression and Residual-Based Tests for Cointegration in Panel Data, Journal of Econometrics, 90(1): 1–44.
  • LARSSON, R, Lyhagen J. (1999). Likelihood-Based Inference in Multivariate Panel Cointegration Models, Stockholm School of Economics, Working Paper Series in Economics and Finance, No:331.
  • LARSSON, R, Lyhagen, J., Löthgren, M. (2001). Likelihood-Based Cointegration Tests in Heterogeneous Panels, Econometrics Journal, 4(1): 109-142.
  • LEVIN, A., Lin, C.F., Chu, C.S. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties, Journal of Econometrics, 108(1): 1–24.
  • MADDALA, G.S., Wu, S. (1999). A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test, Oxford Bulletin of Economics and Statistics, 61: 631–652.
  • MCCOSKEY, S., Kao, C. (1998). A Residual-Based Test of the Null of Cointegration in Panel Data, Econometric Reviews, 17(1): 57–84.
  • NING, Y., Reed, M.R. (1995). Locational Determinants of U.S. Direct Foreign Investment in Food and Kindered Products, Agrobusiness, 11(1): 77- 85.
  • PAULUS, A., Peichl, A. (2008). Effects of Flat Tax Reforms in Western Europe on Equity and Efficiency, ISER Discussion Paper, 2008-06.
  • PEDRONI, P. (1995). Panel Cointegration; Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis, Indiana Univ. WP in Economics, No: 95–013.
  • PEDRONI, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors, Oxford Bulletin of Economics and Statistics, 61(S1): 653–670.
  • PEDRONI, P. (2004). Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis: New Results, Econometric Theory, 20(3): 597–625.
  • PORCANO, T.M., Price, C.E. (1996). The Effects of Government Tax and Nontax Incentives on Foreign Direct Investment, Multinational Business Review, 4(1): 9-20.
  • SARISOY, İ., Koç, S. (2010). Doğrudan Yabancı Sermaye Yatırımlarının Kurumlar Vergisi Gelirleri Üzerindeki Etkisinin Ekonometrik Analizi, Erciyes Üniversitesi İİBF Dergisi, 36: 133-153.
  • SAYGIN, Ö., (2013). Gelir Vergisi Tarifesinin Esneklik Analizi: Türkiye Üzerine Bir Değerlendirme, Vergi Sorunları Dergisi, 301: 175-186.
  • SWENSON, D.L. (2004). The Impact of U.S. Tax Reform on Foreign Direct Investment in the United States, Journal of Public Economics, 54(2): 243-266.
  • The World Bank, World Development Indicators, http://databank.worldbank.org /data/reports. Erişim Tarihi (31.07.2016)
  • Trading Economics, https://tradingeconomics.com, Erişim Tarihi (31.07.2016)
There are 28 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Makaleler
Authors

Berna Hızarcı Beşer

Mustafa Kemal Beşer

Publication Date June 27, 2018
Submission Date April 1, 2018
Published in Issue Year 2018 Volume: 40 Issue: 1

Cite

APA Hızarcı Beşer, B., & Beşer, M. K. (2018). THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi, 40(1), 1-13. https://doi.org/10.14780/muiibd.434909
AMA Hızarcı Beşer B, Beşer MK. THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. June 2018;40(1):1-13. doi:10.14780/muiibd.434909
Chicago Hızarcı Beşer, Berna, and Mustafa Kemal Beşer. “THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT”. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi 40, no. 1 (June 2018): 1-13. https://doi.org/10.14780/muiibd.434909.
EndNote Hızarcı Beşer B, Beşer MK (June 1, 2018) THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi 40 1 1–13.
IEEE B. Hızarcı Beşer and M. K. Beşer, “THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT”, Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 40, no. 1, pp. 1–13, 2018, doi: 10.14780/muiibd.434909.
ISNAD Hızarcı Beşer, Berna - Beşer, Mustafa Kemal. “THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT”. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi 40/1 (June 2018), 1-13. https://doi.org/10.14780/muiibd.434909.
JAMA Hızarcı Beşer B, Beşer MK. THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. 2018;40:1–13.
MLA Hızarcı Beşer, Berna and Mustafa Kemal Beşer. “THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT”. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi, vol. 40, no. 1, 2018, pp. 1-13, doi:10.14780/muiibd.434909.
Vancouver Hızarcı Beşer B, Beşer MK. THE IMPACT OF FLAT TAX RATES ON FOREIGN DIRECT INVESTMENT. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. 2018;40(1):1-13.

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