The role of tax in the foreign direct investment decision process : evidence from UK firms.

This study investigates the interfaces and integration between tax strategy and
corporate strategy in the foreign direct investment (FDI) decision process of UK
multinational firms. Drawing on the prior literature, it aims to develop a better
understanding of: (i) the role of tax in the FDI decision making process; (ii) the stages
at which tax issues are considered in the decision making; and (iii) the processes by
which the FDI strategic decisions are made. Data were collected by means of a web-
based survey using Survey Monkey. The FAME database served to provide the main
sampling frame for the data collection. A total of 192 usable responses were obtained
for data analysis. The relevance of taxation in the FDI strategic decision process has
not generally been addressed in UK academic literature, so little is known about the
processes by and stages at which FDI decisions vis-a-vis taxation are made. It is clear
from the data analysis undertaken, for example, that tax is not a driving factor in
strategic decisions, but one of many factors considered, and that multinationals do not
take decisions based on tax criteria alone. The thesis can thus refute, for instance,
popular perceptions that multinationals' behaviour makes exploitative use of tax
avoidance schemes and devices, which is typically not supported by empirical
evidence. The research findings suggest that tax strategy is part of corporate strategy
in the FDI decision process. The findings show that tax incentives are not an
important motive for FDI compared with other business-oriented motives, which play
more important roles in the FDI decision making process. The study's findings add
topical and original elements to the development of academic literature in this area
and are also of practical significance.