Territorial vs. Worldwide Corporate Taxation: Implications for Developing Countries

 
Author/Editor: Thornton Matheson ; Victoria J. Perry ; Chandara Veung
 
Publication Date: October 03, 2013
 
Electronic Access: Free Full text (PDF file size is 591KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Global investment patterns mean that effective taxation of foreign investors is of increasing importance to the economies of lower income countries. It is thus of considerable concern that the historical framework for cross-border income tax arrangements is not always well suited to allow low-income countries (LICs) effectively to generate tax revenues from profits on foreign direct investment (FDI). Several aspects of this framework contribute to the problem. This paper discusses, in particular, the likely effect of a shift by major economies from the system of worldwide corporate taxation toward a territorial system on the volume, distribution, and financing of FDI, focusing on LICs. It then empirically analyzes bilateral outbound FDI data for the UK for 2002–10 to determine whether the move to territoriality made corporations more sensitive to hostcountry statutory tax rates. Supporting evidence for this hypothesis is found for FDI financed from new equity.
 
Series: Working Paper No. 13/205
Subject(s): Corporate taxes | United Kingdom | Japan | Foreign direct investment | Developing countries | Low-income developing countries | Tax revenues

 
English
Publication Date: October 03, 2013
ISBN/ISSN: 9781484329764/2227-8885 Format: Paper
Stock No: WPIEA2013205 Pages: 25
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
Please address any questions about this title to publications@imf.org