Foreign direct investment inflows on tax revenues in the transition economies of european union
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Jan 12, 2017
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Abstract
There have been significant increases in the flows of foreign direct investment inflows in the world together with the globalization process as of 1980s. In this regard, this study examines the impact of foreign direct investment inflows on the tax revenues in the selected transition economies of the European Union including Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia and Slovenia during the period 1996-2012 by using Dumitrescu and Hurlin (2012) causality test. We found that there was unidirectional causality from foreign direct investment net inflows to the tax revenues, and also there was unidirectional causality from foreign direct investment net inflows to the economic growth.
Keywords: Tax revenues, foreign direct investment inflows, economic growth, panel data analysis
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References
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Im, K.S., Pesaran, M.H., Shin , Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics 115, 53-74.
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https://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx,
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Sarisoy, I., & Koc, S. (2010). Doğrudan yabancı sermaye yatırımlarının kurumlar vergisi gelirleri üzerindeki etkisinin ekonometrik analizi. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 36, 133-153.
Soumia, Z., & Abderrezzak, B. (2013). The determinants of foreign direct investment and their impact on growth: Panel data analysis for AMU countries. International Journal of Innovation and Applied Studies, 2(3), 300–313.
Tiwari, A. K., & Mutascu, M. (2011). Economic growth and FDI in Asia: A panel-data approach. Economic Analysis & Policy, 41(2), 173–187.
Ugurlu, E., Bayar, Y. (2014). Foreign direct investment and international trade in Turkey: Time-series-cross-section methods. Ekonomik Yaklaşım, 25(91), 69-84.
UNCTAD (2015). Global investment trends monitor, No: 18. Retrieved May 13, 2015 from http://unctad.org/en/PublicationsLibrary/webdiaeia2015d1_en.pdf
World Bank (2015a) Foreign direct investment, net inflows (% of GDP) Retrieved May 13, 2015 from http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS
World Bank (2015b) Tax revenue (% of GDP). Retrieved May 13, 2015 from http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS
Breusch, T. S., Pagan, A.R. (1980). The lagrange multiplier test and its applications to model specification in econometrics. Review of Economic Studies, 47(1), 239-253.
Bunescu, L., Comaniciu, C. (2014). Analysis of correlation between tax revenues and other economic indicators in European Union member states. Studies in Business and Economics, 9(1), 24-34.
Dumitrescu, E.I., Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450-1460.
El-Wassal, K.A. (2012). Foreign direct investment and economic growth in Arab countries (1970-2008): An inquiry into determinants of growth benefits. Journal of Economic Development, 37(4), 79-100.
Gropp, R., Kostial, K. (2000). The disappearing tax base: Is foreign direct investment eroding corporate income taxes? ECB Working Paper No. 31. European Central Bank, Frankfurt.
Hurlin, C. (2004). Nelson and Plosser revised: a re-examination using OECD panel data. Mimeo, LEO, University of Orléans.
Im, K.S., Pesaran, M.H., Shin , Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics 115, 53-74.
IMF (2015). World economic outlook database. Retrieved May 13, 2015 from:
https://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx,
Jang-Pyo, H. (2013). Effects of inward and outward foreign direct investments on employment, capital accumulation and productivity. Journal of Regional Studies, 21(2), 123-146.
Lean, H. H., & Tan, B. W. (2011). Linkages between foreign direct investment, domestic investment and economic growth in Malaysia. Journal of Economic Cooperation and Development, 32(4), 75–96.
Mahmood, H., Chaudhary, A.R. (2013). Impact of FDI on tax revenue in Pakistan, Pakistan Journal of Commerce and Social Sciences, 7(1), 59-69.
OECD (2008). Tax effects on foreign direct investment, Policy Brief February 2008. Retrieved May 20, 2015 from http://www.oecd.org/investment/investment-policy/40152903.pdf
Okey, M.K.N. (2013). Tax revenue effect of foreign direct investment in West Africa. African Journal of Economic and Sustainable Development, 2(1), 1-22.
Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22, 265–312.
Popescu, Gheorghe H. (2014). FDI and economic growth in central and eastern Europe. Sustainability, 6(11), 8149-8163.
Sarisoy, I., & Koc, S. (2010). Doğrudan yabancı sermaye yatırımlarının kurumlar vergisi gelirleri üzerindeki etkisinin ekonometrik analizi. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 36, 133-153.
Soumia, Z., & Abderrezzak, B. (2013). The determinants of foreign direct investment and their impact on growth: Panel data analysis for AMU countries. International Journal of Innovation and Applied Studies, 2(3), 300–313.
Tiwari, A. K., & Mutascu, M. (2011). Economic growth and FDI in Asia: A panel-data approach. Economic Analysis & Policy, 41(2), 173–187.
Ugurlu, E., Bayar, Y. (2014). Foreign direct investment and international trade in Turkey: Time-series-cross-section methods. Ekonomik Yaklaşım, 25(91), 69-84.
UNCTAD (2015). Global investment trends monitor, No: 18. Retrieved May 13, 2015 from http://unctad.org/en/PublicationsLibrary/webdiaeia2015d1_en.pdf
World Bank (2015a) Foreign direct investment, net inflows (% of GDP) Retrieved May 13, 2015 from http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS
World Bank (2015b) Tax revenue (% of GDP). Retrieved May 13, 2015 from http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS