Publication Type
Journal Article
Version
acceptedVersion
Publication Date
12-2020
Abstract
Purpose: The purpose of this study is to investigate how a country's competitive tax policy influences its inward foreign direct investments (FDI) in the Asia–Pacific region, even when given particular constraints (e.g., population, public governance, skilled labor, and so on) exist. Design/methodology/approach: The paper uses the system GMM estimation approach to test the hypothesis. Data on FDI, corporate income tax, and various confounding factors were drawn from Ernst and Young's worldwide corporate tax guide, the World Bank, and other sources to create a panel of 28 economies over the period 2000–2016. Findings: The present research confirms the negative association between corporate income tax (CIT) and FDI inflows. The effects of other confounding factors on FDI net inflows are also supported (e.g., connectivity, GDP per capita, population, skilled labor, and trade openness). Our results support the argument that foreign investments may be more sensitive to CIT. Therefore, CIT is an effective indicator to observe international tax competition. Originality/value: The present research uses rich data on statutory CIT and other economic and public governance factors to investigate the relationship between tax competition and FDI inflows in the Asia–Pacific region. The findings add important supplements to the nuanced understanding of the political-economic dynamics in this region, especially when cut-throat tax competition, trade tensions, and stagnant economic growth have been key challenges for global economies.
Keywords
Asia-Pacific, Corporate income tax, FDI, Tax competition, Tax policy
Discipline
Accounting | Asian Studies | Finance and Financial Management
Publication
Journal of Public Budgeting, Accounting and Financial Management
Volume
33
Issue
2
First Page
157
Last Page
176
ISSN
1096-3367
Identifier
10.1108/JPBAFM-04-2020-0054
Publisher
Emerald
Embargo Period
5-6-2021
Citation
XU, Chengwei and WU, Alfred M..
International tax competition and foreign direct investment in the Asia-Pacific region: A panel data analysis. (2020). Journal of Public Budgeting, Accounting and Financial Management. 33, (2), 157-176.
Available at: https://ink.library.smu.edu.sg/soa_research/1883
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1108/JPBAFM-04-2020-0054