Do tax sparing agreements contribute to the attraction of FDI in developing countries?
Céline Azémar
, , Jean-Louis Mucchielli
2007, International Tax and Public Finance, 14, pp.543-562
Résumé
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.