By Thomas Andersson
This e-book explores the fight for earnings from direct funding among multinationals and constructing nations. It discusses which regulations paintings most sensible in influencing the behaviour of MNEs and the way constructing international locations compete with each other for multinational funding. It argues that the tax regimes of other nations rarly deter traders yet that nationalisation acts as a robust disincentive. It additionally concludes that governments shouldn't be anticipated to sacrifice the surroundings to draw multinationals.
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Extra resources for Multinational Investment in Developing Countries: A Study of Taxation and Nationalization
Sample text
This study is generally not concerned with the firm characteristics that determine the profitability of direct investment. We simply conclude that the undertaking of direct investment requires that an MNE expects either to retain larger benefits or account for smaller costs compared with the best alternative. However, we do need some idea of how host countries are affected by direct investment. This is discussed in the following section. THE SOCIO-ECONOMIC IMPACT ON HOST COUNTRIES This study is confined to the socio-economic impact of foreign direct investment on developing host economies.
See Chapters 5–7 for further discussions. Turning to taxation, the policies belonging in this category concern the following: • • • • • • • • • repatriation of profits; purchase of inputs locally and abroad; sales domestically and abroad; the prices used by an MNE, including royalty payments etc; employment, local participation in various activities and training of local personnel; the transfer of technology, including establishment of research and development (R & D)activities; credit policies; degree of competition environmental and social protection As with nationalization, we assume that the host country’s objective is to retain profits that would otherwise be repatriated.
It is less often noted that there may also be responses by other host countries. 3 An impact on direct or portfolio investment, which is associated with the ex ante investment decision of other MNEs than that targeted, or the lending decisions of banks and other private creditor institutions. Military retaliation can today be considered a small threat in response to selective nationalizations, since it is costly for home countries. Moreover, it is the response which most dramatizes the MNE-host country relationship.