Tax Effects on Foreign Direct Investment in the United States: Evidence from a Cross-Country Comparison
Year: 1989
Type: report
Abstract: This paper investigates how the tax system of the U.S. and the capitalexporting country combine to affect the flow of foreign direct investment (FOl) into the U.S. First, using aggregate data, it corroborates earlier work suggesting that the U.S. effective tax rate does influence the amount of FO! financed by transfers of funds, but not the amount financed by retained earnings.The data are then disaggregated by major capital-exporting countries to see if, as theory would suggest, FO! from countries which exempt foreign-source income from taxation is more sensitive to U.S. tax rates than FOl from countries which attempt to tax foreign-source income.The data ana'ysis does not revea' a c'ear differentia' responsiveness between these two groups of countries, suggesting either difficulties in accurately measuring effective tax rates or the availability of financial strategies which render the home country tax system immaterial in affecting the return on FDI.
DOI: 10.3386/w3042
Author: Joel Slemrod
Institutions: National Bureau of Economic Research, University of Michigan
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1995375813