The Impact of Foreign Direct Investment on Tax Revenues in Six ASEAN Nations: A Dynamic Panel Data Model

Abstract

The aim of this study was to assess the impact of foreign direct investment on taxation in the Association of Southeast Asian Nations, known as ASEAN. There were five indicators namely foreign direct investment, tax revenues, foreign exchange, consumer price index, and balance of trade of Cambodia, Indonesia, Malaysia, Philippines, Singapore, and Thailand were integrated in a dynamic panel data model which utilized an estimation method developed by Arellano-Bond. The research findings indicated that tax revenue was impacted by net flow of foreign direct investment. This conclusion was drawn based on the positive slope coefficient and high statistical significance observed. Additionally, the estimated parameters of the lag of the dependent variable, foreign exchange, consumer price index, and balance of trade had significant influence on taxation. The tax revenues were collectively explained by all independent variables in the dynamic panel data model, as evidenced by the empirical findings.