The impact of corporate income tax rate on foreign direct investment in Australia and implications for technology transfer

Abstract

FDI is an important channel through which technology can be transferred across countries. The increased mobility of capital and the globalisation have influenced tax competition among countries to attract foreign investment. This paper investigates the effects of company tax rate on FDI stocks into Australia over the period 1960-2003 using time series econometric techniques. The results show that Australia has a potential to attract FDI by lowering its company tax rate. The findings suggest that lowering the taxes by host country to attract FDI would also in effect help the country to accumulate its technological stock enhancing its global competitiveness.