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Do tax sparing agreements contribute to the attraction of FDI in developing countries?

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Abstract

Measuring the effects of taxation on FDI in developing countries requires consideration of the tax sparing provision. This provision signed between developed and developing countries protects host country fiscal incentives for FDI. This paper estimates the impact of tax sparing provisions on Japanese outbound FDI between 1989 and 2000. We find evidence that the tax sparing provision influences positively the location of Japanese FDI, even after having taken into account reversal causality.

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Authors and Affiliations

  1. CES, University of Paris I Panthéon Sorbonne and CNRS. Mail adress: CES-TEAM International, Maison des Sciences Economiques, 106-112, Bd. de l”Hôpital, 75647, Paris Cedex 13, France

    Céline Azémar, Rodolphe Desbordes & Jean-Louis Mucchielli

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  1. Céline Azémar
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  2. Rodolphe Desbordes
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  3. Jean-Louis Mucchielli
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Correspondence to Céline Azémar.

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JEL Classification F23 · H25 · H32

We Thank Michael Devereux, Edward Graham, Robert Lipsey, David Margolis, Claudia Rivas, Deborah Swenson, anonymous referees and seminar participants at the Franco-Korean conference in Seoul, and at the Western Economic Association conference in Vancouver for helpful discussions.

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Azémar, C., Desbordes, R. & Mucchielli, JL. Do tax sparing agreements contribute to the attraction of FDI in developing countries?. Int Tax Public Finance 14, 543–562 (2007). https://doi.org/10.1007/s10797-006-9005-9

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