Skies Educational

Effect of corporate tax rate on foreign direct investment: analysis for India

Ranjana Kumari

Loading

Madras School of Economics, Chennai, India

Correspondence to: [email protected]

389 Downloads

https://doi.org/10.47721/ARJHSS20210403020

Vol 4(3), pp. 1-14, December 2021

Copyright © 2021 Author(s) and Skies Educational.
This article is published under the terms of the Creative Commons Attribution License 4.0

ABSTRACT

It is not easy to do business in India. Investment in India is not straightforward or well-ordered. However, it is the era to earn supernormal profit and it offers the golden opportunity to invest. It will not be without risks and disappointment, but rewards will correspond to it. This paper reflected the relationship between corporate tax rates and inflow of foreign direct investment in domestic country and how it affects domestic entrepreneurship using time series data for 40 years (1980-2019). In this study, a linear regression model captured the effect of policy factor corporate tax rates, and other economic factors on Foreign Direct Investment (FDI) inflows. According to findings using mergers and acquisitions, there is a positive relationship between the inflow of foreign direct investment and entrepreneurship. Because of trade liberalism, a small country may now compete for foreign direct investment if it can provide a sufficiently attractive package. But sometimes policymakers cannot make head or tail, so they have lost many of the instruments traditionally used to promote local competitiveness, employment, and welfare. Here, openness is the most significant variable, so to create more incentives for foreign direct investment government should take openness into consideration before making policies.

Keywords: inflow of foreign direct investment, corporate tax rate, domestic entrepreneurship.

REFERENCES

Abdioğlu, Nida, Mine Biniş, and Mehmet Arslan (2016). “The effect of corporate tax rate on foreign direct investment: A panel study for OECD countries.” Ege Academic Review 16, no. 4, 599-610.

Azman-Saini, W. N. W., M. Farhan, C. L. Tee, and Y. L. Tun (2018). “FDI inflows and R&D activity in developing countries.” International Journal of Economics and Management 12, no. S2, 509-521.

Bartels, Frank L., and S. A. de Crombrugghe (2009). FDI policy instruments: advantages and disadvantages. United Nations Industrial Development Organization.

Danakol, Seçil Hülya, Saul Estrin, Paul Reynolds, and Utz Weitzel (2017). “Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse?.” Small Business Economics 48, no. 3, 599-612.

Estrin, Saul, Seçil Hülya Danakol, Paul Reynolds, and Utz Weitzel (2014). “Foreign direct investment and domestic entrepreneurship: blessing or curse?”.

Hansson, Åsa, and Karin Olofsdotter (2010). Tax differences and foreign direct investment in the EU27. Department of Economics, Lund University.

Hartman, David G. (1985). “Tax policy and foreign direct investment.” Journal of Public Economics 26.1. 107–121.

https://www.oecd.org/investment/investment-policy/40152903.pdf

Kandpal, Vinay, and P. C. Kavidayal. “A review of Tax Incentives and its impact on Foreign Direct Investment in India.”

Klemm, Alexander, and Stefan Van Parys (2012). “Empirical evidence on the effects of tax incentives.” International Tax and Public Finance 19, no. 3, 393-423.

Morisset, Jacques, and Neda Pirnia (2000). “How tax policy and incentives affect foreign direct investment: a review.”

Rosenkranz, Stephanie, G. U. Weitzel, and S. Danakol (2013). “Foreign Direct Investment and Entrepreneurship.”

Shane, Scott, and Sankaran Venkataraman (2000). “The promise of entrepreneurship as a field of research.” Academy of management review 25, no. 1, 217-226.

Ucal, Meltem, Kivilcim Metin Özcan, Mehmet Huseyin Bilgin, and Julius Mungo (2010). “Relationship between financial crisis and foreign direct investment in developing countries using semiparametric regression approach.” Journal of Business Economics and Management 11, no. 1, 20-33.

Uvalic, Milica. “Saul Estrin.” (2016). Walsh, Mr James P., and Jiangyan Yu (2010). Determinants of foreign direct investment: A sectoral and institutional approach. International Monetary Fund

CITATIONS

CrossRef Citation (0)

Google Scholar Citations

AUTHORS

Ranjana Kumari is a research scholar at Madras School of Economics, Chennai, India

ARTICLE METRICS

CrossRef Article Metrics

HOW TO CITE THIS ARTICLE

Kumari R. (2021). Effect of corporate tax rate on foreign direct investment: analysis for India, 4(3), 1-14. https://doi.org/10.47721/ARJHSS202103020

Scroll to Top