Does Foreign Capital Increase Tax Revenue: The Turkish Case

Eda Balıkçıoğlu, Başak Dalgıç, Burcu Fazlıoğlu


We examine the effect of the foreign direct investment (FDI) on taxes paid for Turkey with a special focus on the differentials between firms operating with different technology levels. We utilize a comprehensive dataset for Turkish manufacturing firms over 2004-2012 period and employ Generalized Method of Moments methodology. The results of the study confirm that foreign affiliation increase the taxes paid by the firms. We find a bigger impact of FDI on taxation for high-technology firms than medium or low technology firms.

Keywords: Foreign Direct Investment, Tax Revenue, and Generalized Method of Moments

JEL Classifications: D22, F23, H2

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