Tax Policy And Reform For Foreign Direct Investment In Developing Countries

This paper identifies tax factors in 21 developing countries that have an impact on foreign direct investment flows. It categorizes those factors into issues associated with tax coordination; tax rates and rate structures; and composition of the tax base. Recent actions by countries reveal no clear pattern in their attempts to increase tax coordination, while many have reduced corporate tax rates and stream-lined tax incentives. However, broad-based tax reform is lacking in most, leaving room for further possibilities in tax reform for attracting foreign investment. The paper also addresses nontax factors that can be instrumental in attracting foreign investment.

This publication reports the results of a project examining taxation and foreign direct investment (FDI).

Tax incentives neither make up for serious deficiencies in a country's investment environment nor generate the desired externalities. But when other factors, such as infrastructure, transport costs, and political and economic stability are more or less equal, the taxes in one location may have a significant effect on investors' choices. This effect varies, however, depending on the tax instrument used, the characteristics of the multinational company, and the relationship between the tax systems of the home and recipient countries.

Annotation This volume consists of two essays: the first one examines this issue in the context of Indonesia, the second provides a review of earlier literature.

The World Investment Report 2022 provides the latest trends and prospects for foreign direct investment. It documents the recovery of cross-border investment flows after the pandemic shock, looking at greenfield investment in industry, project finance in infrastructure, and international production activities of the largest multinationals. The Report also reviews recent policy developments, including trends in national investment policy measures and international investment agreements. It presents an overview of international corporate taxation and national investment incentive schemes worldwide. The theme chapter of the Report examines the implications for investment and investment policies of ongoing reforms in international taxation, including the adoption of a global minimum tax for multinationals and other mechanisms to counter harmful tax practices. It looks at the overall expected impact on cross-border investment flows, with a specific focus on developing countries, and assesses the effect on the use of common investment promotion tools such as fiscal incentives, special economic zones, and regional cooperation frameworks. The Report has a dedicated chapter on the global trends in financing for sustainable development. It presents key findings and policy implications for the consideration of the General Assembly of the United Nations.

Each national report addresses, among other things, the following issues: - the sources of law and general principle of the law of evidence - the means of evidence - the role of the judge and the parties in the evidence procedure - the evaluation of evidence - the production of evidence - the registration of produced evidence - the possibilities to admit new evidence or to renew evidence in appeal proceedings.

For tax policy to encourage maximum investment of capital (both foreign and domestic) it is necessary to take into account the potential mobility of capital across international borders. Economic analysis of investment incentives should therefore incorporate the effects of variables such as source rules, nexus rules, attribution rules, foreign tax credits, and so on, in addition to traditional variables such as legal tax rates and the revenue implications of the distribution of the tax base.