Does Taxation Effect FDI in India? An Empirical Study of Hartman Model

Abstract

In recent years, a large body of academicians and professionals has focused on the effect of tax policy on both inbound and outbound foreign direct investment. This study examines the possible effects of domestic taxes and rates of return on FDI in India. Using the econometric models given by Hartman (1984) for a sixteen-year sample period, i.e. 1992-2007, tax policies are found to be significantly affecting FDI in India. The model was empirically investigated in sixteen forms with different ratio of FDI to different type of GNPs as dependent variables.