The Impact of United States Tax Policies on Sectoral Foreign Direct Investment to Asia
Publication | December 2020
How sensitive to corporate tax rates is inward foreign direct investment from the United States to developing Asia?
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Changes to United States (US) corporate tax rules effective in 2018 provided important incentives for US corporations working abroad to repatriate profits back to the US. This paper examines how sensitive US foreign investors are to corporate tax changes, looking at greenfield foreign direct investment from the US into productive sectors in developing Asia. Using panel data at the country and sector level spanning almost 15 years, this paper shows that the corporate income tax rate does not affect the US’ inward foreign direct investment once market size, costs, openness, and the business environment are taken into account.
Contents
- Introduction
- What has Happened to the United States Foreign Direct Investment in Asia?
- What Drives Foreign Direct Investment , and How Important are Taxes and Incentives?
- Recent Changes in United States Tax Law: Any Impact on Asia-Bound Foreign Direct Investment?
- The Impact of the Taxes Depends on the Sector
- Conclusions and Policy Recommendations
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