Marenzi A., D’Amuri F. (2006).
Features and Effects of Corporate Taxation on FDI. Tax Systems and Tax Reforms in South and East Asia, London, Routledge, pp. 109-133
This paper is part of a wider research on South and East Asia countries’ taxation, carried on at this Department, under the direction of L. Bernardi, A. Fraschini and P. Shome, and the supervision of V. Tanzi. The scope of the article is to give an overall picture of the existing interactions between the economic structure, the corporate tax system and the attractiveness of FDI inflows in a selected sample of South and East Asian countries. The sample comprises the two biggest developing countries (China and India) at the rushing stage of their catching up; two countries in a middle stage of development (Malaysia and Thailand) and, finally, two industrialized countries (Japan and South Korea). The six countries are characterized by a different degree of economic development and by a different level of maturity in their corporate tax systems. Also the role played by FDI in the economic performance of these countries has been different: Malaysia, Thailand, and Korea have experienced high levels of foreign capital inflows for a long time. For different reasons, India and Japan have had a poor performance in the attraction of FDIs. China, instead, has opened up its markets in the last two decades, experiencing a huge inflow of foreign investment. The structure of corporate income taxation and of tax incentives reflects the different level of economic development of the six countries analyzed. The paper discusses the characteristics of CIT and the effectiveness of tax incentives in the six countries in attracting FDIs. Finally, some broader considerations on the design of tax incentives policy will be drawn