Tax Treaty Policy And Foreign Direct Investment In Pakistan

ABSTRACT

The study investigates the impact of tax treaties on foreign direct investment in Pakistan by controlling the institutional variables control of corruption, government stability, rules and laws, and investment profile. Tax treaties are designed to alleviate the burden of double taxation and create a favorable environment for cross-border investment. By analyzing the study, the historical development of tax treaties between OECD and the UN and their implementation in Pakistan provides a comprehensive overview of how tax treaties influence FDI. To examine the relationship, this research employed a gravity model to analyze the impact of tax treaties on Foreign Direct Investment (FDI) at both the aggregate and sectoral levels, including the primary, secondary, and tertiary sectors. The result of study depict that treaties are significantly decreasing the flow of FDI. This decline is attributed to the introduction of various provisions in treaties aimed at preventing tax evasion, which in turn has led to a reduction in Foreign Direct Investment (FDI). The result indicates that policymakers should enhance the effectiveness of tax treaties to attract FDI ensure that the benefits of tax treaties fully utilized without deterring investment.

Meta Data

Author: Iqra Bibi
Cosupervisor: Mahmood Khalid
Supervisor: Hafsa Hina
Keywords : Double taxation, Foreign Direct Investment, Gravity Model, OECD model, Tax treaty policy, Treaty shopping, UN model
External Examiner: Naseem Faraz

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