Tax Structure and the FDI: The Deterrent Effects of Complexity and Uncertainty

27 Pages Posted: 5 Mar 2013

See all articles by Kelly D. Edmiston

Kelly D. Edmiston

Center for Insurance Policy & Research / NAIC; University of Kansas - School of Medicine; University of Missouri; Baker University

Neven T. Valev

Georgia State University - Department of Economics

Shannon Mudd

Thunderbird, American Graduate School of International Management

Date Written: April 2003

Abstract

In this study we examine the connection between the varied experiences of the transition countries in attracting FDI and their diverse experiences in transforming their tax structures to be consistent with a market economy. In particular, we study whether complexity and uncertainty in their tax laws have deterred foreign direct investment by increasing transaction costs, the compliance burden and the unpredictability of tax liabilities. Our results indicate that complexity and uncertainty, in the sense of multiple tax rates, indeterminate language in the tax law, and inconsistent changes in the tax laws have a significant negative effect on inward foreign direct investment.

Keywords: Public Finance, Taxation, Transition, FDI, Uncertainty

JEL Classification: H25, F21, F23

Suggested Citation

Edmiston, Kelly D. and Valev, Neven T. and Mudd, Shannon, Tax Structure and the FDI: The Deterrent Effects of Complexity and Uncertainty (April 2003). William Davidson Institute Working Paper No. 558, Available at SSRN: https://ssrn.com/abstract=405400 or http://dx.doi.org/10.2139/ssrn.405400

Kelly D. Edmiston

Center for Insurance Policy & Research / NAIC ( email )

1100 Walnut Street
Suite 1500
Kansas City, MO 641056
United States
8167838067 (Phone)

HOME PAGE: http://https://www.naic.org

University of Kansas - School of Medicine ( email )

3901 Rainbow Boulevard
Kansas City, KS 66160
United States

University of Missouri ( email )

Columbia, MO 65203
United States

Baker University ( email )

Baldwin City, KS
United States

HOME PAGE: http://https://www.bakeru.edu

Neven T. Valev

Georgia State University - Department of Economics ( email )

Andrew Young School of Policy Studies
University Plaza
Atlanta, GA 30303
United States
404-651-0418 (Phone)
404-651-4985 (Fax)

Shannon Mudd (Contact Author)

Thunderbird, American Graduate School of International Management ( email )

15249 N 59th Ave.
Glendale, AZ 85306
United States

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