Summary
Title: Taxes and Human Capital as Determinants of Foreign Direct Investment in EU: The role of Most Favoured Nation treatment
Author: Andreas Helmersson
Supervisors: Cecilé Brokelind and Rikard Larsson
Problem discussion and problem Formulation: The recent year??s rapid increase in foreign direct investment (FDI) is a clear indication of increasing globalisation. In order to stay competitive companies must take advantage of talented people, new technology and new markets around the world. Not only companies but also countries and regions, such as EU, need to take advantage of globalisation and the advantages that come with the increase in FDI around the world. Studies have shown that FDI does not only make companies more competitive but it also stimulates the economic growth of the region where the FDI takes place. There are many determinants of FDI such as, for example, the size of the local market and logistic costs. In recent years there has however been a lot of activity in EU that affects two factors, which according to theory, is determinants of FDI. One area where recent years activities have the potential to affect taxation in EU is the area of EC law and bilateral tax treaties. The activity has concerned the question whether there should be community most favoured nation (MFN) treatment in bilateral tax treaties. Taxes are according to theory a determinant of FDI which makes an analysis of these business law events topical and important. The other area is human resources where EU has made several attempts to raise the level of human capital in the EU region. Human capital is according to theory another determinant of FDI which makes it important to investigate whether EU??s efforts to raise the level of human capital will affect the inflows of FDI into the EU region. Countries with a high level of human capital do in most cases also have a high tax level. This makes it more interesting to investigate how important taxes and human capital are as determinants of FDI inflows into the EU region.
The research question is thus if the level of Human Capital in EU is a determinant of FDI inflows into the region? Should there be MFN treatment in bilateral tax treaties according to EC law and is the potential tax effect of the MFN treatment also a determinant of FDI inflows into the EU region?
Purpose: One of the two purposes of this thesis is to find out whether the level of EU??s human capital and taxes are determinants of FDI inflows into the region. The taxes in the EU region are said to be affected if there would be MFN treatment in bilateral tax treaties which brings in the other purpose which is to find out whether MFN treatment in bilateral tax treaties is provided for according to EC law.
Method: A deductive research method was chosen in this thesis. The research consisted of books, articles, legal documents and case law analysed. The empirical research in the business law part was done by analysing the EC treaty and appropriate case law. The empirical research in the business part was done with the help of a number of small qualitative case studies.
Conclusion: According to the findings in this thesis is it very unclear whether MFN treatment in bilateral tax treaties is provided for according to EC law. The main argument for MFN treatment would be art 12 EC which forbids any type of discrimination that is based on nationality. Art 12 EC is applicable in all areas that are covered by ??the four freedoms?. ??The four freedoms? cover all forms of investment and cross-border activity which means that the scope...
